By Joe Calabrese
President, Harris myCFO
www.harrismycfo.com

Wealth created by one generation can provide for and deeply enrich the lives of generations to follow. However, multi-generational wealth may also pose challenges — to those who have earned it, as well as to those who will inherit it.

It is hard to overstate the following: Communication among all family members is the key to preparing the next generations for the inheritances they one day will receive. Periodic family "board meetings" can enable family members to share with each other their expectations and concerns; to discuss and ultimately reach agreement on shared financial objectives and strategies; and to work together to resolve potential problems.

For maximum communication and productivity, an objective third party—not the patriarch or matriarch, should lead family meetings. The third party—whether a wealth management professional, trust professional, investment manager, attorney or certified public accountant—can facilitate meetings with an impartiality that parents, no matter how well intentioned, simply cannot bring to the table.

Through hands-on experience, parents can teach their children about financial decision-making. When children reach their late teens, parents can consider inviting them to lead certain portions of the family meetings. A third-party facilitator can help guide the children as they lead conversations on selected topics—e.g., the best use of the family's vacation home and charitable giving decisions. Younger children can recommend and make decisions such as small philanthropic gifts and choosing among the family's favorite charities with an adult's guidance.

How Much to Give Descendants vs. How Much to Give Charities

While parents generally delight in passing on their estates to children and grandchildren, many also feel strongly committed to passing some of their wealth to charitable causes they have been devoted to during their lifetimes. Deciding how much to give to descendants — versus how much to give to charity — requires thoughtful deliberation.

Parents may decide to provide each child with a set amount and leave the rest to charity. If this is the case, adult children should be informed about their parents' choice and the reason for the decision. Discovering too late that they will receive only a portion of their parents' estate may cause children to squabble or even to initiate costly and bitter legal battles.

Charitable Giving As Unifying Force

Approached sensitively, charitable giving can be a wonderfully unifying force. Children can be quite positive about funds designated for charities when they are allowed to have a role in the charitable decision-making. A family foundation or donor-advised fund offers children a heightened understanding about the ways in which others will benefit. It turns their focus outward toward the community.

For example, in a family of five, each member could make decisions about one-fifth of the money set aside for charitable grant making during the year. This fosters collaborative thinking and consensus building and family members can move to broader discussions about their wealth and the family's estate plan.

Although parents are usually delighted to pass their wealth on to their children, some demand that their children adopt their values. Children, in turn, may chafe at such parental control and regard their inheritances as their entitlement, to which no strings should be attached. Joint decisions about charitable giving can be the bridge between the desires of each generation. They are also tools for parents to conscientiously groom their children for the privileges and responsibilities of wealth, while fulfilling their dreams for the thoughtful continuation of their legacies in the generations ahead.