You’ve surely seen this trope play out on most any sit-com tv show you’ve watched. Person A does something, and person B observes what person A does but completely misinterprets it. A mess is created and hilarity ensues. Twenty minutes later, person A and B finally have a conversation. All is resolved as poignant music plays underneath.
That’s all well and good when seen from the safe distance of a television screen. But is the Sitcom Effect set to be the script for your own estate plan and charitable intent? I don’t think you’d find that very funny.
We’ve talked before about the dramatic way that a family’s wealth tends to decline over subsequent generations. A 2010 Mellon Private Bank Client Study points to two simple reasons why this wealth fades so quickly: passing on money is difficult, and passing on family values is equally difficult.
Yet why is it such a challenge? Often because, as in a sitcom, there is no discussion at all, just occasionally observable but unexplained practices. Only 24% of high net worth individuals actively encourage their children to invest in a shared family financial goal. Only 39% agree to involving family in financial decision-making.
I recently joined a conference call with SEI and Family Business magazine that discussed ways for families to better manage this wealth transfer. The answer, in one word, is communication.
Parents who fail to talk about issues of wealth, values, and mission, and fail to engage in a dialogue with their children on these issues are most likely to have trouble down the road. One point that really struck me: if you are silent on topics of wealth, your children will interpret that silence to mean the subject is taboo.
Better to spend time discussing your values and engaging in a dialogue about agreed upon family values than to remain quiet. The speakers on the call encouraged engaging the next generation in dialogue, mentorship, and experiential learning to understand the benefits and burdens of wealth.
The point related to values plays into charitable giving. What if one of the reasons that subsequent generations drift away from their parents’ and grandparents’ charitable interests over time is that the original generation simply didn’t take the time to share why they viewed these causes as important?
This would suggest there is value in ushering children into discussions of charitable giving. The kids don’t need a “voting share” necessarily, but a way to have their voice heard and, more importantly, hear your voice articulate what you view as so great about the organization or cause.
You still may want to take steps to safeguard your donor intent – in fact, we’d recommend it even in cases where you trust the next generation or your intended estate guardian unhesitatingly. The discussion of your principles and beliefs will at best bring your children into a shared vision for giving, and at worst won’t allow them to say they didn’t understand your commitment.
Don’t let your life become a sitcom. Have that tough conversation about money, about your family’s values, and about your charitable goals. It may not make for a good 22 minutes of television, but it will allow you to leave a far stronger legacy.