In the financial services world, the concept of gifting is most commonly thought of as passing along tangible assets, such as stock, property or cash. However, there are also intangible assets that can be shared with family members. These include values, traditions and education. The link between tangible and intangible assets will define the legacy that is passed on to future generations.
Money and lifestyle are inextricable. Whether a person has accumulated a large sum or a small nest egg, there were attitudes and behaviors that inherently influenced decisions along the way. Outcomes from those choices hopefully led to enlightenment and potentially ushered in a shift in thinking. All that valuable knowledge -- a gift in its own right -- needs to find its way to loved ones.
What is an appropriate venue for communicating this treasure trove of advice? Consider a “family meeting.” The process is a bit more formal than just sitting around the dinner table for a chat. It is a scheduled, structured event with an agenda. Generally, parents work with their financial advisor to lay the foundation of what they’d like to convey to their children. A customized agenda that fits the family’s dynamic is the goal.
Some elements of the meeting should be universal while others are optional. Establishing ground rules, such as meeting length, the importance of open-mindedness and respecting the speaker by not interrupting, are a must. It’s also imperative for parents to lead a family values discussion. This may include how their wealth was accumulated, views on philanthropy, core values that guided financial decision making, thoughts on debt, investment philosophies, and goal successes and failures. A highly suggested element is soliciting observations from children regarding what they learned about money from watching their parents.
Elective items fall under three main categories – education, estate planning and the family portfolio. From an educational standpoint, stock market basics, biases that affect “staying the course” financially, and tax ramifications of various assets could be reviewed. Deciding whether to share the parents’ estate plan, usually through a flow chart, should be contemplated. Also consider discussing end-of-life wishes. Finally, a net worth statement could be examined, as well as a list of trusted professionals who could help if an unexpected event arose.
In developing the agenda, take the ages of family members into account. For those in their 20s and 30s, the focus should be on establishing healthy financial behaviors and laying the groundwork for a strong financial foundation. Adults in their 40s and beyond may desire to know more about the asset picture and estate plan.
A family meeting can add a deeper layer to any gifting strategy. Be creative in the process and gift your knowledge to those you love.
Karey L. Edwards, CFP®
Senior Financial Advisor