Talking to Your Family About Wealth
By Victoria Scanlan Stefanakos
Wealth has many benefits. It affords the opportunity to explore and develop talents, connect with family and community, and make a positive impact on the people around you. Yet it also has the power to upset those very ends. It can be used to distract yourself from your own growth, and it can cause conflict among family members.
Wealth can be an explosive issue for some families, says Keith Whitaker, senior consultant at Wise Counsel research in Milton, Mass. He's a member of a small but growing field of so-called "wealth whisperers," who focus on the emotional issues around wealth. "So we sit down with wealthy adults and ask them the big question: 'What really matters to you, and why?' Answering this question takes some reflection, but it helps focus thinking about the next step."
The next step is different for everyone. Some families will want to discuss inheritance issues, which perhaps means crafting a will or disbursing wealth while you're still around to enjoy it. But no matter what your concern, it's important to at least talk about wealth up front. In his practice, Whitaker frequently helps wealthy individuals prepare for financial discussions with their kids. The idea is to establish the groundwork for a regular, open dialogue about family wealth and goals. Here's how to start that conversation with your family:
Consider context. Your children's ages, as well as their personalities, should determine what kind of discussion you have. "Even in a family, different siblings have very different characters," says Whitaker. With one child, the conversation might be about limits and responsibilities, while with another, the conversation might be more about opportunities.
When you (and your advisors) think the time is right — perhaps as your children hit their college years — you'll have to shift from thinking about them as kids who need to be protected and insulated. Instead, try to view them as adults with whom you partner in working toward your and their goals.
Dispel myths. If you haven't talked about money openly in the past, there may be misconceptions or out-and-out errors in what family members know about your family's resources. Some family members — especially young ones, who are used to an allowance and perhaps grew up with an affluent lifestyle — may think you have deeper pockets than you do, or be unaware that the family's money is dependent on one person's continued employment. Others may be completely in the dark about the extent of your family's resources.
The point is, your family has to be realistic about what they needn't worry about, and what responsibilities they should anticipate.
Confront your concerns. Wealth can breed anxiety. Parents may worry that revealing the specifics of their wealth and their intentions for doling it out will sap their children's will to achieve anything. Children fear that asking for financial help may make them look greedy or lazy — or as though they are eager for their parents to die. They may also suffer from the nagging fear that they won't live up to their parents' successes.
Both generations must ask themselves what they're really worried about, and how valid those concerns actually are. "If you've got a kid who's been setting up the proverbial lemonade stand since she was six and as an adult is now trying to start her own business, worrying that a large financial gift will be a disincentive to her probably isn't a good use of your energy," Whitaker says.
Take an investment approach. As you determine how you'll distribute your wealth, ask your children, "How could I invest in your dreams?" Your kids' answers will vary, of course, but might range from investing in a business, a philanthropic project or graduate school, to helping them move into a dream home.
Listen, then talk. When you're ready, schedule a family meeting. Whitaker recommends using a facilitator — your financial advisor is a likely choice — to help your family avoid falling into old patterns that trigger heated debate and hurt feelings.
During the meeting, listening is the key. Hear out your children's dreams and concerns. Then, you can explain why you arrived at your decision about how you'll distribute your wealth.
Your kids may not agree with your choices. But your aim should be their understanding of why you have chosen to pass on your money the way you have. Done early and well, this process goes a long way toward preventing conflict among loved ones.
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