Three tips in talking with your children on family wealth
P2C News - Monthly update for families building wealth 9 December 2015

The conversation with your children on family wealth is a timely and valuable discussion. How and when you should undertake this conversation is the question some wealthy parents are confronted with. Having “The Talk” about wealth is a topic that provokes uncertainty and delay. Avoiding the exchange, only creates further difficulties. Without the right guidance and values, this is a valid concern. Wealthy children are raised in an environment that naturally provides them with advantages, which can cause self-doubt even in the most talented and well-grounded of maturing adults. Here are three tips to having an effective and positive experience with your children when undertaking The Talk.

Tip 1 – Focus on your values – money cannot buy you happiness

It is the values proposition that is the most important part of any talk about family wealth. The proposition that money can’t buy happiness, and that living a good life is the road to contentment. Of course, actions speak louder than words, and parents who embody their values and consistently demonstrate them to their children have an advantage. In this sense, The Talk replicates what is being practiced and the environment the children have grown to understand. A common goal is to strive for children to appreciate that they were given the backbone, sense of responsibility and accountability, and prudence to succeed regardless of the wealth at hand.

Tip 2 - Be proactive – timely

It is important not to delay The Talk for too long. Even if beneficiaries are just entering adulthood, they need to know their financial situation and develop responsibility. The structure of The Talk may be built around the flexible trust arrangements that are in place to stage distributions of income and principal to beneficiaries, while mitigating taxes. Parents can lean on these trusts as a guide to the terms of wealth distribution, and young adult children will see that thoughtful planning was part of the process. They will also begin to understand that managing wealth is more complex than it may seem and the process deserves their respect.

Tip 3 - Don’t go it alone

Why not include an advisor to be present to support the nature of The Talk. Trusted counsellors can address any technical questions and also show to your children the seriousness of The Talk and that they are ready for the responsibility. An objective outsider can provide insight into why the trust was set up, details on the sacrifices made by grantors, and an outside perspective on how values make an impact in the real world. Beyond The Talk itself, advisors can contribute by helping to organise and guide family meetings that attempt to more actively involve family members in managing the estate. Answers about values, philanthropic endeavours, and investment decisions are different for every family and require thorough investigation, consideration, and consultation.

In summary, for many estates, goals should be reviewed at least annually in a structured forum – this is not a Christmas Dinner conversation, but is more suited to convening a family meeting. Every family is unique, and The Talk is certain to be different from household to household. Parents in most situations can help ease the transition by including into the conversation family values, understanding the trust vehicles that are in place, and enlisting outside help to convey the message in a structured environment.

Best regards,

Martin Barry
Vice President,
Chief Wealth Management Officer

     
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La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Credit Funds under AFSL 222213. It employs over 150 staff and has managed over AUD$10 Billion covering over 100,000 investment grade assets since inception in 1952.

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