How do you combine financial knowledge and charitable intent in your wealth management lessons? Following are some thoughts for your consideration.
Shared Concerns
Multi-billionaires Bill Gates and Warren Buffett have vowed to leave the majority of their fortunes to charity, reasoning that a large inheritance would do their children more harm than good. Wealthy families across America face similar concerns.
To counter these and other potentially negative effects of wealth, many parents are committed to educating children about finances from an early age. Studies show that marketers start targeting children as early as age two. So the sooner you start talking about money, the better. Explain the meaning and purpose of employment, the importance of managing credit and paying bills, and the best way to handle cash through banks and ATMs. Let children practice what they have learned about earning, saving, spending, and giving money through their own experiences with allowances and after-school jobs.
As a child matures, his or her financial education should become more rigorous. Learning how to balance a checkbook, create a budget, respect the role of credit and debt, and develop strategies for funding important goals such as a college education helps teens make the important transition from child to adult.
While parents generally are competent educators about financial matters and can serve as a child’s most important role models, they could use some support. In that regard, schools need to be proactive in teaching, motivating, and creating a greater awareness of both the benefits of money management and the short- and long-term impact of poor financial decisions. Many high school graduates are unable to balance a checkbook and lack the basic financial survival skills involved with earning, saving, and investing money. Parents should urge schools to incorporate personal finance topics into their core curriculum or to offer personal finance as a stand-alone “required” life skills course.
Set a Charitable Example
If we want to ensure future generations of volunteers and donors, we must teach our children how to give of their time, skills, and money. Adult family members can set an example by pursuing their own philanthropic and volunteer activities, or by encouraging the whole family to get involved in charitable activities based around a shared interest, such as the outdoors, sports, or religion.
Ensure Your Legacy Through Incentive Planning
Wealth holders often worry that the important values they pass on to heirs during their lifetime will be lost once they are gone. For these individuals, creating testamentary trusts that allow you to reward your children’s desired behaviors or discourage undesirable activities can be a meaningful addition to an estate plan. For instance, a trust may offer educational support for heirs who pursue a specific field of study or attend a particular institution.
A trust may promote “family values” by providing income support to heirs who choose to stay at home to raise children or who foster or adopt children in need. Alternatively, a trust can withhold benefits from heirs convicted of a crime or who fail conditional drug or alcohol testing.
Financial advisors play an important role in the creation and success of a legacy by helping you articulate the values, beliefs and priorities you want to perpetuate and the methods to achieve your goals. Working together, you can offer meaningful relationships that go beyond a financial inheritance.
If you’d like to learn more about this topic, please contact William R. Zeuner.
Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters
Article by Wealth Management Systems, Inc. and provided courtesy of Morgan Stanley Financial Advisor.
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