Teach Your Kids About Finances
Passing along financial values to younger generations is a worthy goal. Good communication and appropriate planning can help you achieve it.
Passing along financial values to younger generations is a worthy goal. Good communication and appropriate planning can help you achieve it.
By sharing your values as well as your money, you can pass along a priceless legacy that may help preserve your family’s prosperity for years to come. The following are general tips for family discussions, which can be adjusted to accommodate the age of your children, and your personal financial position.
Transferring your knowledge and values generally takes more than just being a good role model. It also takes clear communication about your financial goals, priorities and expectations. Family discussions can provide a forum for talking about the legacy you wish to leave behind, while giving your children an opportunity to ask questions and voice their concerns.
Defining your own position on money management, debt and charitable giving can help you create a stewardship policy that you can communicate to your children. Beginning this process when they’re young makes it more likely that you’ll successfully instill in your children the values that are important to you. If one of your goals is to discourage debt, for example, you might make it clear to your children that you will not come to their rescue if they spend beyond their means.
Family discussions can identify values that are important to everyone and help your family create a strategy for charitable giving or volunteering.
If you have concerns about your family’s ability to properly manage or preserve the assets that will eventually pass to them, you may want to include distribution restrictions in your estate planning. An incentive trust offers an opportunity to reward desirable and discourage poor behavior and promote the values you cherish.
An incentive trust can determine what conditions your children or other beneficiaries must satisfy in order to receive trust assets. This type of trust is typically used to motivate a younger generation to achieve a wide variety of objectives and to discourage behavior that you consider undesirable. The trust’s terms generally spell out requirements for distributing assets when a beneficiary reaches a certain age or achieves a specific goal that you’ve established. In the event that a beneficiary does not meet the conditions you’ve imposed, the trust usually includes a provision allowing a disbursement of trust assets to pay for certain expenses, such as medical care.
An incentive trust arrangement can help build character in your children and secure their financial independence by encouraging education, philanthropy, a healthy lifestyle, a solid work ethic or a number of other financial values important to you.
Like other trusts, you can arrange for professional management of the incentive trust's assets by an experienced fiduciary.
Article is adapted from content provided by DTS.
