Hide or Sneak Peek: What are the Kids Entitled to Know?

November 11, 2014

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The mere thought of creating trust fund babies prevents some parents from sharing information about their wealth with their children. The idea of preparing kids is appealing, but concern mounts that knowledge of your wealth might destroy motivation for the next generation to initiate their own financial independence. However, keeping your offspring in the dark, only to have a stranger tell them all about it after you are gone, may not be preferable.

Once you have arranged your estate plan according to your wishes, the question of what and how much to tell your children usually arises. Consider these steps for speaking to the kids about the information they may be entitled to know.

Set a Family Meeting

Opening dialogue with the children about an overview of your net worth is a good starting point. You’ve probably put a lot of effort into making your estate plan, so the discussion shouldn’t be a casual, in-passing comment. It may help to break down the information into manageable buckets: real estate, stocks and bonds, retirement plans, and life insurance (as well as trusts that hold policies).

Who Should Attend

Consider inviting or even having your financial advisor, attorney, and CPA facilitate the meeting with you and your kids. It’s at least a good idea for your children to know who they are, so they may contact them when the need arises.

If you have named a child to serve in a particular role such as Executor, an ad-hoc job until the estate is settled, or a longer-term role such as a Trustee, it may benefit them to be included in family meetings. These meetings are where they can better understand what will be expected of them in these roles. If any of these positions are given to a family friend or institution representative, it may serve to make the introduction. 

Don’t Forget the Key

Don’t forget to tell them where the key is to the bank deposit box or inform them of electronic “family vaults” that store important legal documents such as wills, trusts and life insurance policies.  The insurance company won’t call them!

Forewarn Beneficiaries of Surprises

Let your kids know if inheritance is equal among them — or not. Equal inheritance generally means equal love, so it may help to explain your reasons for unequal distribution. Most children understand if siblings have special needs or if differences exist. Early warning takes the sting out of the surprise.

Discuss Non-Family Beneficiaries

If you tell your kids now about a beneficiary outside the family such as a charity, they won’t be surprised if their inheritance takes a haircut! This may also be a good opportunity to impart your values to your children by giving you the chance to communicate why supporting charities or other outside beneficiaries is important to you.

These topics may be discussed as generally or specifically as you deem necessary. Determining whether the approach should be a transparent “tell all” confessional or more of a sneak peek is something every family should determine based on the financial readiness of their kids.

Parents might not believe that their kids could manage their inheritances currently, but starting the conversation about these 5 topics earlier helps them understand their eventual responsibilities, so they’re more prepared to handle things when you aren’t around. 

Deborah Stavis is a member of the DailyWorth Connect program. Read more about the program here.

Securities offered through FSC Securities Corporation, member FINRA/SIPC. Advisory and insurance services offered through Stavis & Cohen Financial, a registered investment advisor not affiliated with FSC Securities Corporation.

1330 Post Oak Blvd. Suite 2190 Houston, TX 77056 713-275-7750 main 800-962-2590 toll-free

Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither FSC Securities Corporation, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

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