Preserving your legacy & your relationship with your children
Ask anyone about their financial goals and they will likely tell you that family security tops the list. It stands to reason, then, that HNW individuals have nothing to worry about. Unfortunately, this is far from true, especially if your definition of “security” includes the bond among your children. In fact, according to this twenty-year study, seventy percent of estate plans for well-to-do families “fail,” meaning they result in financial losses and the breakdown of relationships among the heirs. Here are some tips to keep your family intact while staying true to your vision, while preserving your legacy.
Respect Their Autonomy. For better or worse, you had your chance to raise your children. Conditioning their inheritance upon specific life choices (i.e. that they get married or join the family business) puts them in the terrible position of having to choose between financial security and personal happiness. It also guarantees that they will resent you long after you’re gone. If you’re tempted to place these kinds of stipulations in your estate plan, ask yourself this question: Do I want to be remembered for the unconditional love and generosity I showed my children, or my need to run their lives?
Stick to Your Ideals. It’s common for families to be divided along ideological lines, however, the fight shouldn’t have to extend to your estate and preserving your legacy. If you’ve built your life on certain principles – be they social, spiritual or political – chances are you want your legacy to reflect that after you’ve gone. The best way to ensure this is to make specific bequests to causes you care about, as well as conditions on how your money can and cannot be used by your heirs. This is not the same as controlling your children – they are still free to give their own time and money in any way they want, but when it comes to sharing your wealth they must do so in accordance with your wishes.
Don’t Treat Your Children the Same. This is not about playing favorites, but about acknowledging each child’s individual desires, challenges and strengths. One of the most common examples is a child who struggles with alcohol addiction – you’re going to provide for them in way that ensures their wellbeing but limits their direct control over the money. You might also make a larger provision for a child who needs ongoing medical care or has chosen a career that provides great value to society but does not pay much. This also extends to specific bequests; for example, you might want to leave the beach house to the child who loved it most, rather than splitting it with those who complained about spending summers there. Whatever your situation, it’s always best to have a conversation with your kids during the planning stages, rather than leaving them to question your motives later on.
Don’t Keep Them in the Dark – Every parent wants their child to realize their potential rather than relying on a future “jackpot”; however, keeping the size of your estate a secret can be a recipe for disaster, especially if they have not been educated on financial matters. Suddenly they are left to deal, not only with your loss, but the weight of managing your estate. They might feel distrustful of financial advisors and even their own siblings or other heirs. On the flipside, not revealing a financial loss or your plans to leave the bulk of your estate to charity can have catastrophic effects on kids who have been led to believe that they will receive a substantial sum. Having a conversation with all of your children will foster unity and provide an opportunity voice any concerns; sharing your financial information in real-time, for example, through an all-in-one solution, will help them understand how you make financial decisions and how those decisions affect the family’s financial wellbeing and support preserving your legacy.
Conversations about money can be uncomfortable, especially if they are tied to your passing; however, the potential consequences of staying silent can be financially and emotionally devastating. Your children may not like what you have to say, but they will respect you for being honest with them, setting boundaries, and preparing them for the future.
