By Larry Mendel, Vice President of Sales
Key Takeaways:
- Start the conversation about family wealth sooner rather than later. Many parents avoid discussing wealth with their children, but wealth and estate details will ultimately come out. Early conversations help prepare heirs to understand financial structures and intentions instead of learning them only after assets transfer.
- Ask thoughtful planning questions about readiness. Consider if your family understands your intent, if your children have real experience managing resources, and whether you or an advisor should lead the teaching process.
- Hands-on experience builds stewardship. Allowing children to engage with aspects of wealth while you are there to guide them offers a strong learning opportunity and can shape their ability to respect and manage assets responsibly.
- Introduce your advisors to the next generation. Making formal introductions to your financial team (advisors, planners, attorneys) fosters continuity, builds relationships, and helps children understand the professional support structures around the family’s financial plan.
- Sharing successes and mistakes has value. Openly discussing both your financial successes and errors gives heirs lessons that can lead to better decisions in the future, helping them be prepared when they eventually take on responsibilities.
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 Senior Wealth 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 children 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 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 good stewards.
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 make 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 for your family wealth, please reach out to your Senior Wealth Manager or to Jackson Keenan, MONTAG’s Director of Financial Planning.
About MONTAG Wealth
MONTAG is a family-owned Wealth Management firm that has been based in Atlanta for over 40 years. We serve as wise counsel, providing expertise, financial advice and investment counsel to high-net worth families, individuals, and non-profit organizations to sustain wealth for generations.
Disclosure:
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. These analyses have been produced using data provided by third parties and/or public sources. While the information is believed to be reliable, its accuracy cannot be guaranteed. 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. There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss. Loss of principal is possible.
