Sponsored Content by J.P. Morgan Private Bank
By David Nolet
Talking to your children about money and wealth can seem overwhelming with so much to cover, but it might be easier and more productive than you think
Generational wealth, an aspiration to have financial resources to pass on for the lasting benefit of your family, has become an increasingly familiar term in recent years. Those financial resources can be in many forms from cash to investments, a house or a small business, and can vary in amount based upon what is truly beneficial for an individual family. Through engaging with your family you can identify what they want for themselves, each other and the world at large. You can begin to formulate an action plan to achieve those results. All of this cannot be accomplished in one conversation, but over the course of many discussions, you can trace the family’s roots, identify core values, and teach children to think carefully about the opportunities they enjoy now and those they will someday inherit. In the end, you’ll be able to see the unique narrative for how your family sees itself.
Here are three steps to uncover what’s important to your family, and how to set goals that can be collectively achieved.
Start by articulating your vision
Few people have a set of core principles already in mind. It takes time to craft them and for partners and families to align on those principles. Ask questions such as: What do you value most in life? How do you want your wealth to shape the lives of your child/children? What priorities do you want to fund? (Education? Family travel? Community service?) What pitfalls do you most want to avoid? (Entitled children? Meaningless spending?)
Use this time to be aspirational and focus on things beyond money including family unity, community engagement and personal development. Don’t try to assign dollar amounts or create a framework for the future at this stage as that will deter the process of crystalizing your vision.
By listening to others and responding thoughtfully your family will have more productive conversations allowing everyone to be seen and heard. It’s important to keep in mind that answers may not come quickly, or stay the same; however, over time, foundational principles will emerge from ongoing conversations.
Bringing your vision to life
Once your family is aligned on a vision and your core principles, the next step is for you and your partner to create and update wills, trusts, and other estate planning documents which bring them to life. This legal framework will guide how your heirs benefit from and steward the wealth you have created.
Equally important is to keep your beneficiaries updated on your plans as too often they don’t learn inheritance details or gain insights into family wealth until it’s too late. With more advance knowledge, they can make better decisions to fulfill your wishes.
Be sure the language in your estate planning documents is clear in directing how to use the funds as well as being fair to individual family members. For example, the education of future generations is a priority for many families. One idea to ensure this is thoroughly accounted for is to draft an education spending policy. Identify how far beyond high school you want to underwrite a child’s education and what that will include such as tuition, room and board, course fees, entertainment, cellphones and overseas study. Also keep in mind if you will fund comparable expenses for a child/grandchild who chooses not to go to college and under what circumstances.
Encourage family engagement
Children gain a great deal from understanding how the family manages its resources, as well as the roles and responsibilities they may be asked to one day assume. Children must learn to speak knowledgeably with investment advisors and estate administrators so they can effectively continue to manage the family’s finances and continue the vision you put in place.
These skills aren’t learned overnight and as such can be developed over the years. Actively including your children in important financial decisions dependent upon their age, ability and interest can help facilitate their skills. They can also learn through ongoing family discussions, formal family meetings/retreats led by outside specialists, tapping the expertise of family advisors, online study or in-person courses.
And don’t overlook the importance of your leading by example. Helping your family live their values in an environment built on positive communication, behavior and lifestyle is central to their actively embracing the values you wish to instill.
Helping your children learn how to manage wealth is a lengthy and multifaceted process. The steps outlined in this piece can help you breakdown and start the process in a way that best suits your family. Remember, there is no better time than today to start sharing your values on wealth with your children.
David Nolet is a Managing Director and the Fort Worth, TX Market Manager at J.P. Morgan Private Bank. David oversees a team of bankers, investors, wealth strategists and financial specialists that deliver guidance across investing, philanthropy, family office management, credit, fiduciary services, advisory services and more. To learn more about David Nolet and the Private Bank in Texas, visit https://privatebank.jpmorgan.com/gl/en/locations/united-states/texas/fort-worth
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