By Larry Mendel, Vice President of Sales
Here at MONTAG, we have been asked many times by wealthy clients about how and when they should begin to advise their children about their family and generational wealth.
These clients have worked hard, been successful and enjoyed the fruits of their labor. Eventually, the assets they have accumulated will most likely transfer to their estate for the benefit of their heirs and charitable giving. Many matriarchs and patriarchs shy away from discussing their wealth with their children, but in reality, all of the above will be disclosed after their passing.
When Should You Begin Conversations About Generational Wealth With Your Family?
The question often asked is, “When and how should I be engaging and teaching my children about how to live with wealth and to respect these assets as good stewards?”
For high-net-worth families, this subject is very deep and very complex and can take on many layers, from tax planning, trust and estate structures, and lifestyle considerations. All of these are important to get in place, but at some point, these assets and trusts are going to be turned over to the next generation.
Some key questions to ask yourself are:
- Will my family be prepared and understand my intent and structure, or will they need to figure it out on their own?
- Will my children have had the experience of dealing with wealth, or will they learn in real-time when it passes to them?
- Do I want to teach my heirs, or do I want a third party, advisor, family office, or financial planner to take the lead on this?
All of these are reasonable considerations for your specific situation.
Personally, I have always felt first-hand experience is the best way to learn. It’s a wonderful gift to give your children a chance to learn and explore while you are there to offer guidance. The insight and guidance you provide also acts as a wonderful safety net and allows you the opportunity to look through the windshield to see how your heirs might carry themselves.
It’s also a good idea to make introductions to your current advisors and allow them to enjoy the relationships you have created. This allows for continuity of your thinking and your legacy to permeate into the thinking of the next generation.
Life experience teaches us through the mistakes we make to create better outcomes as we move forward, and giving your heirs the benefit of hearing of your successes and your mistakes could be a powerful tool.
Generational Wealth Management In Atlanta
At MONTAG, many of our clients employ trusts and we manage these assets on a regular basis. With decades of experience, each of our Portfolio Managers can offer guidance along the way in working with family dynamics. For example, most of the trusts have some form of age restrictions embedded into the irrevocable trust, for when the assets will transfer to the beneficiaries. As these dates of transfer approach, the question becomes, should the trustee let the trust end or if allowed, extend the dates for disposition, or give them the opportunity to explore, by naming the beneficiary as their own trustee. How you decide these matters is personal based on your outlook from the questions above, but, in my opinion, the sooner your heirs are exposed to the workings of your financial decisions, the better prepared they will be to handle both the estate process as well the assets left behind.
We have walked alongside many generational wealth clients and have witnessed how family dynamics come into play. In one instance, we had a family that finally allowed the children to have the freedom of their assets with no education, restrictions, or oversight. When the child received this money, they were excited, lived large and spent the assets frivolously. Unfortunately, and not surprisingly, this situation didn’t end well. On the other hand, another family had educated their child and had an open dialog regarding their wealth. As their child came of age to receive the assets, they were prepared. This child’s response was, “Wow, this is a lot of responsibility, I need to take care of it!” In an ideal scenario, this is the answer any parent would like to hear, illustrating that children have been taught to respect money and be a good steward.
Generational Wealth Planning Tools
There are many types of trusts and structures which can be utilized to express your wishes and create tax strategies and protection for your wealth and wealth transfer.
MONTAG is fortunate to work closely with our clients and their team of lawyers, CPAs and other advisors to create individual plans which makes sense for each family’s specific needs. And, if you are in need of references, we are happy to make introductions to some of the high-quality trust and estate attorneys we work with on a regular basis.
As you may know, trusts can keep assets secure from creditors and allow parents to control their assets from the grave. But at some point, I believe that the people you love deserve the freedom to enjoy and utilize these assets responsibly for their purposes. It’s never too late to start these conversations, but I am confident that if you do, the beneficiaries will be better prepared to carry on your legacy and stewardship of what you have built.
If interested in starting a conversation about how MONTAG can help you to prepare your children about your family wealth, please reach out to your Portfolio Manager or to Jackson Keenan, MONTAG’s dedicated, financial planner.
About MONTAG Wealth
MONTAG Wealth has established itself as, and remains, a trusted wealth management and investment company since 1982. As a multi-generational, family-run business, our firm understands that superior service requires treating clients like family to enable them to build and secure wealth for current and future generations. Because they understand each client has their unique story, MONTAG always takes the time to get to know you, your investment philosophy, and your priorities to tailor strategies to your perennially evolving needs. Ultimately, your financial security is at the forefront of every decision you make.
The information provided is for illustration purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action to be taken. MONTAG employees do not provide legal or tax advice. For specific legal or tax matters, you should consult with your own legal and/or tax advisors.
