Wisdom in Wealth

Strategies, Stories, and Lessons Learned Over the Course of 25 Years Helping Families Plan Their Financial Lives

Why Do We Talk to Family About Money?

By William Beynon & John Walker | November 09, 2022

Why Do We Talk to Family About Money?Warren Buffett, the “Oracle of Omaha”, says “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

The thing is…I don’t think that our treatment of gold is the only thing that a Martian might scratch their head over in terms of how we treat money. Most individuals regard family and money as the two most important things in life. It is interesting to me that even though these things are critically important, most of the families I observe are in no rush at all to blend the two. Human beings are hard-wired to want community, especially family. Familial bonds are among the strongest on planet Earth. These bonds literally unite us. As important as these bonds of family are, families can also be wildly and incredibly corruptive. A quick look at history’s worst villains will prove that an unhealthy family can and often does produce adults who cannot function in society. In an odd twist, some of the worst family situations have also produced some of history’s brightest minds, best-known businesspeople, and humans with the greatest capacity for compassion. The key skill here is coping. Humans must learn to cope with whatever stresses are placed on them. I wouldn’t begin to have the credentials to describe why some cope well and others do not. I have the credentials to discuss how money can and does cause stress in families and how those stresses can irreparably destroy these most basic of human bonds. Let’s look at how we can cut down on the head-scratching from our neighbors, the Martians.

I would like to discuss how to address youngsters, teens, and grown adult heirs. Each has a need-to-know on certain things, and I think those things change over time. Before we even get to heirs, let us talk about the individuals who actually created their wealth. All people have sensibilities and emotional archetypes. Whether you like the 4-Character Myers-Briggs work, or perhaps the Strengths Finders assessment, we need to get to the heart of who you are.

What Does That Mean?

I believe that we all need value statements about what shaped our core belief system about money and family. There must be a remembrance of family victories and defeats. Those tribal tales should be passed down so that generations can retain those lessons and add to them. Each generation enriches the family lore. There have been barrels of ink spent on the questions of “Who am I?” and “Why am I here?” I don’t intend to pontificate on those as much as the specific stories that shape our life and career. In my own life, I once worked for a restaurant manager who told me that he was going to start his own place and that I wasn’t coming with him. He told me that if in 10 years I was still in the kitchens, we’d both failed. I saw him for the first time since that moment recently some 16 years later. I was very happy to tell him that I took his harsh words to heart and made something of myself. I have shared that moment with my young son. It has become part of the Walker family lore. What are your stories? Who have you told them to? What does it mean to be in your family? What traits set your family apart? It is to the family leaders to gather the family and establish those mantras, so the rising family has a sense of identity. For example, I have taught my son, “Walkers work smart, work hard, and win. If we don’t win, we learn and win next time.” I hope that these words instill a work ethic, tenacity, and steadfastness in him. I think it is worth examining the mantras in your family about who you are and what you stand for. Once you have them, be sure to keep them alive and well in the family.

Youngsters

When it comes to the littlest ones in the family, I think that simple is best. It is appropriate to share that your family has worked very hard and been very good stewards of the wealth you built. It is also appropriate to share that because of that hard work, your family gets to do things that others might not. In that same vein, words of stewardship and responsibility start to take root. You might say, “It was hard work that got us here, and it takes even harder work to stay. We have obligations to each other and those around us to serve the community. We cannot just have fun all the time.” I will pause here to interject the unspoken contract between society and owners of wealth. I believe it is never too early to start sowing the seeds of philanthropy in your family’s youngest members. Families of means have the responsibility to look around them and determine what things they want to see more of and what things they think need to be changed. Teaching your little ones early on to spend their time and treasure helping others is never a bad idea. I think that a family must have at least one financial act of service and one physical act of service that involves the junior members. My point in talking with little ones is to let them know that your family has worked hard, overcome adversity, and been successful. Let them know that their station comes with responsibility. The challenge presented to us all is in creating well-balanced stewards and avoiding creating entitled individuals who never rise to their fullest potential because of family wealth.

Young Adults

As for your families have members who have reached the ages of cars and after-school jobs, the discussion starts to be more specific. I think you still refrain from full disclosure but replace that with active involvement in the basic tenants of wealth. Time should be spent talking about income, taxes, savings, and investing. I strongly suggest having powers of visibility and influence over your children’s accounts. They need to understand basic concepts of social security, FICA taxes, and so on.

At this phase, I suggest two other specific actions:

  1. Starting Your Kids in Stocks- The first is starting your kids in stocks; give them incentives to invest with perhaps a matching program. How many of you reading this have or had a workplace savings plan that matched your contributions? Can you remember the epiphany moment when your accounts started to grow? Be an active participant in that moment for your family. Keep it simple. There is no need for exhaustive research and complex construction. You are simply trying to plant a seed that flowers into an adult who understands the compounding power of early investing.
  2. Family-Elected Charitable Gifts- The second thing I suggest is borrowed from Mr. Tim Belber JD, AEP®. Tim suggests introducing the idea of family-elected charitable gifts. Select a dollar amount that you intend to give. Let the family know they are expected to present ideas for causes that they feel deserve support. Let everyone know that the person who gave the idea gets to present the check.

Hopefully, this idea fosters a little healthy competition while starting to gather the family to talk about money. This activity forces participants to hear and be heard, ask questions, learn to win, and learn to cope with loss. This also allows the family to gather and give. The goal of discussion with maturing family members is to set the roots of saving, investing, taxes, and philanthropy early. Hopefully, as they age, they are honing these skills for themselves. In terms of legacy planning, I suggest that the individuals in this group understand that they are from a family of means, and the family employs certain professionals to help with the care and legality of those means. I would refrain from specific numbers or details. Letting them know that there are structures in place and people to help is a great step at this age.

Adults

Now, things get tough, and we have adults to talk with. However, adults have their own ideas and judgments about family and finances. Once your children have grown and become adults, more discernment is required. Not all children grow up with the same sensibilities as their parents or even their siblings, so care should be taken to treat everyone fairly; albeit not totally equally. If you have developed systems of communication about finances in your family, this is the phase where the disclosure becomes more mature. You may start to ask your children to have relationships with your advisors or have roles like the durable power of attorney, or healthcare surrogate. If you have not developed these systems. I suggest you start slowly. Many families find themselves with grandchildren before they decide to engage in this kind of discussion. Start with an agenda. Decide what your objectives are and lay out a plan to communicate them.

Start Simple

Let your family know that over the course of several discussions, you intend to start to share things about the family’s financial situation and how you intend that situation to impact them. Take small bites. I strongly suggest your first step contains two elements:

  1.  Let the family know that you have a financial team. Give a brief role statement for each member of that team.
  2. Family philanthropy exercise (as referenced above), the hope here is to observe how your family copes with insights into your wealth, team, and charitable intentions.

Once you have done these first steps, observe how the family responds, and engages with each other. If you are pleased with the way things are going set another meeting and perhaps start to discuss the bigger picture plan. Let the family know that the team of professionals you’ve engaged has built structures to ensure that the wealth you have built is being stewarded in a legal, risk, and tax-sensitive way. Let them know that they will inherit and that your team is placed to aid them in the transition. Again, I encourage a period of waiting and watching to see how your family responds. Once your family understands that you have a plan, advisors, and philanthropic wishes, I encourage you to consider some advanced annual giving.

The IRS allows us all to give an annual exclusion gift. This gift is free from taxation to you and the recipient. Married people may both give or split gifts if needed. As of this writing, the gift exclusion is for $16,000 per person.* Giving in advance allows you to observe how the dollars are used. It also allows your possible participation in the giving. Perhaps your opinions will be sought out in the usage of such gifts. The goal of this step is to begin or further the process of disclosure to your family and ensure that they are ready to cope with your estate. The ultimate goal of this endeavor is to prevent shock on your family. Few people cope well with sudden and massive change. Starting the process of sharing early ensures that questions and concerns can be addressed while you are alive. You can share your deepest wishes and motivations. You still have time to change plans if you feel that someone has been treated unfairly or a concern you never pondered comes to light. The art of legacy planning and wealth transfer is a delicate blend of money, family, feelings, taxes, and assets. If you use care in the intentional sharing of information over time and allow your family to rally around you, this process can be one that glues everyone together generationally. If you choose silence, there is a huge risk that your hard-earned wealth could tear your family apart. Sadly, by then, you may not be alive or possess the faculties to help. I would warmly urge you to discuss family planning with us and allow us to help you in the setting of agendas and delivering of messages to your family. Having help can reduce the emotional stress and shift the burdens of presentation to a trusted advisor. This can help clarify things more objectively. As always, we would love to engage you in a discussion around anything you’ve read here. You are welcome to reach out to us at any time.


*What's new - estate and Gift Tax. Internal Revenue Service. (n.d.). Retrieved July 20, 2022, from https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax 
CWA Asset Management Group, LLC is an SEC-registered investment adviser, doing business as Capital Wealth Advisors and as blueharbor wealth advisors. CWA’s ADV 2A can be accessed via https://adviserinfo.sec.gov/. This material is as of the date indicated, is not complete, and is subject to change. Any opinions expressed herein represent current opinions only and no representation is made with respect to the accuracy, completeness or timeliness of information and CWA assumes no obligation to update or revise such information. Additional information is available upon request. Certain information has been provided by and/or is based on third-party sources and, although believed to be reliable, has not been independently verified and CWA is not responsible for third-party errors. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Nothing herein should be interpreted as investment advice. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. CWA does not offer tax advice. Your tax accountant or CPA should be contacted for tax advice.
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William Beynon
President & CEO

Co-Author of Wisdom in Wealth.

John Walker
Executive Vice President | Private Wealth Management

Co-Author of Wisdom in Wealth. 

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