Passing wealth to the next generation involves much more than having the right estate documents in place. Families also need to prepare their children and grandchildren for the responsibilities, decisions, and opportunities that can come with an inheritance.
The good news? You don’t have to have every detail figured out before starting the conversation. Below are answers to some common questions about preparing your family for a successful wealth transition.
1. When should I start talking to my children about our family’s wealth?
Earlier than you may think. The conversation can evolve as children become adults and their financial lives become more sophisticated. You don’t necessarily need to begin with specific dollar amounts. Start with your family’s values, how your wealth was built, and what you hope it will accomplish in the future.
2. Do my children need to know exactly how much they will inherit?
Not necessarily. Every family is different. What’s more important is that your children understand that an inheritance may be part of their future and are prepared for the responsibilities that come with it. The level of financial detail you share can increase over time.
3. Why is it important to prepare the next generation before they inherit?
Receiving significant wealth can introduce complicated financial and emotional decisions. Preparing heirs ahead of time can help them better understand investments, taxes, trusts, estate plans, charitable giving, and the responsibilities associated with managing family wealth.
4. What should we discuss during a family wealth meeting?
The first conversation doesn’t have to cover everything. The goal is to start a conversation – not finish it in one discussion. It may include:
- Your family’s values and goals
- The purpose of your estate plan
- Who your financial, tax, legal, and other trusted professionals are
- How investments and trusts are structured
- Expectations surrounding an inheritance
- Questions or concerns from your children
5. Should our financial advisor be part of the family conversation?
That is entirely up to you! But having your advisor present can help facilitate the discussion, explain financial concepts in plain language, answer questions, and with your permission provide context around the family’s financial and investment strategy. It also gives your children an opportunity to build a relationship with the advisor before they need their help.
6. What if my children aren’t financially experienced?
That’s one of the best reasons to start now. Financial knowledge can be developed over time. Introducing children to investing, financial planning, taxes, trusts, and other aspects of wealth gradually can help them become more confident and prepared.
7. What if my children have very different attitudes toward money?
That’s common. One child may be financially sophisticated while another may have little interest in investing. One may be conservative while another is comfortable taking more risk. Understanding these differences can help families plan and communicate more effectively.
8. How can I pass along our family’s values and not just our assets?
Talk about the story behind the wealth. How was it built? What sacrifices were made? What does your family believe about work, education, generosity, philanthropy, or helping future generations? A meaningful legacy is often as much about transferring knowledge and values as transferring financial assets.
9. How does JL Bainbridge help families prepare the next generation?
At JL Bainbridge, relationships have always been at the heart of how we serve our clients. With your authorization, we welcome the opportunity to get to know our clients’ children and families, answer their questions, and help them better understand the financial plans and investment strategies that may eventually become their responsibility. Our goal is continuity – helping today’s clients while building relationships that can support their families for generations to come.
10. What’s the first step?
Start the conversation. You don’t need a formal agenda or all the answers. Consider scheduling a family meeting with your JL Bainbridge advisor and inviting the family members who will eventually play a role in your financial legacy.
It’s Your Future. And theirs.
You’ve spent years building, managing, and protecting your wealth. Preparing the people who may one day inherit it is an important part of protecting that legacy. contact your JL Bainbridge advisor to schedule a family meeting. We’ll help guide the conversation, answer questions, and begin preparing the next generation for what’s ahead.
Disclosure
Any views and opinions expressed in this article are those of JL Bainbridge &Co., Inc. and are subject to change and reflect our judgment as of the publication date. This content is for general educational purposes only and should not be considered personalized investment advice. Specific recommendations and investment advice are only provided to clients pursuant to a written advisory agreement.
JL Bainbridge will not share your account or personal information with family members without your authorization. Likewise, family members attending a meeting do not become clients of JL Bainbridge unless they enter into their own advisory agreement.
JL Bainbridge is a registered investment adviser. Registration with the SEC does not imply any level of skill or training. JL Bainbridge is not a broker-dealer and does not offer tax or legal advice. Please consult your tax or legal professional for assistance regarding your individual situation. For more information about our firm and our investment adviser representatives, please review our ADV part 2A Disclosure Brochure, Privacy Notice, and Relationship Summary (Form CRS) at www.jlbainbridge.com or reference the SEC website for more information on the firm and its advisers at: https://adviserinfo.sec.gov/firm/summary/108058.
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