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How to pass on your values, along with your estate, to the next generation

Published on: 16:19PM Aug 28, 2018

How to pass on your values, along with your estate, to the next generation

Q:  When it comes to the next generation, what do parents believe is the most important thing to pass on?

Parents want the next generation to be better off, but they don’t define “better off” purely in financial terms. According to a recent Merrill Lynch survey, the no. 1 answer to the question “What’s most important to pass on to the next generation?” for people over 45 was “values and life lessons.” The answer “financial assets or real estate” came in last. In between were “instructions and wishes to be fulfilled” and “personal possessions of emotional value.” In large part, my experiences with my own clients confirm this finding. If wealthy couples faced the choice of being able to hand down either their money or their values, I have found that they’d choose the latter. In my opinion, it bodes well for the next generation that more parents today recognize that inherited wealth stands to be mismanaged or squandered if no values are attached to the wealth.  

Q: Is there a process you recommend to help your clients identify values that are important to the entire family?

There is no all-purpose method to identify values but, in my opinion, values are borne from the life experiences of the parents and also are handed down from their parents and grandparents.

Given that wealth transfer is involved, parents should consider values that carry financial impact (i.e., “always invest in life-long learning”) in addition to more general values that may be unique to an individual family (i.e., “always consider your integrity when making a decision”). At the appropriate age, parents should hold a family meeting to learn from their children what’s important them and so they can contribute to the creation of the values. Doing this creates a greater sense of buy-in among family members.

I’ve also found that the act of writing something down on paper is helpful. Once values are written down after they’ve been articulated, they become much easier to recall, teach and practice. Parents can then look for creative ways to consistently remind their family of their values (e.g., display the values in a picture frame; give gifts that reinforce the values, etc.).

Q: What should we be done to reinforce values early with children?

One of the most important thing parents can do is lead by example and make sure your children see it. For example, if you stress charitable giving and volunteering with your family, you might pool monies together in a Donor Advised Fund to not only support a preferred charitable cause, but also be able to recommend grants. Similarly, parents should bring their children to their favorite nonprofits while they are at an early age to show them the importance of volunteering individual time to a cause.

I’ve also seen clients use an allowance as a vehicle to transmit values. In this context, allowance monies only are awarded for specific work behaviors that reinforce a family’s values. This process can begin with children as early as ages seven to nine—the age range children become aware of the concept of money.

Q: What can be done as part of estate planning to prepare the next generation for inheriting wealth?

One of the most simple, effective and cost free actions is creating an ethical will. The values that shaped a family or, for example, fueled the growth of a family farm would become the basis for an ethical will. Often no more than one or two pages, an ethical will allows you to share your vision for your family for generations to come. It can also go a long way toward instilling the values you expect your heirs to live by while encouraging them to consider how they contribute to their community and the world.

Q: Any special advice for farm families?

I find that many clients – heads of farm families included – have difficulty talking out loud about their own mortality with their children. Farm parents also may have legitimate concerns and hard opinions about how their estate should be divided up among their children, especially if the farm business is multi-generational. In these cases, family conversations can help find answers. It is not uncommon nowadays for estate planning attorneys and wealth advisors bring in a professional facilitator to manage and guide family meetings. In some of my client experiences, I’ve found that bringing in a neutral third party helps a family examine issues from multiple angles so they can make better decisions.

I also believe the farming ethic itself can play a crucial role in passing on values. Showing unconditional love and letting children learn hard lessons are two of the most important things farming parents – or any parents – can do. This means being supportive of and sacrificing for children, but also setting clear boundaries, letting them make mistakes and not bailing them out if they run into financial troubles.