In my latest book, “J.K. Lasser’s New Rules for Estate, Retirement & Tax Planning- 6th Edition” (published January 2019), I discuss a strategy for passing along your family values to your children.
If you have young children, I know you feel your first responsibility is to provide for their basic support including food, shelter, clothing and education and raise them in a loving family. In my forty-plus years of working with families I often find that parents are less deliberate in passing on the family values that they feel are important especially in the area of finances. In fact, money continues to be a ‘taboo’ topic among many families. I think parents often assume children will ‘absorb’ appropriate family values just by being around their parents. My experience is that this is not the case. Children, including adult children, need to, ideally, be told and shown the value system you want to pass on to them. This falls into many categories including giving other people respect; managing finances; giving back to your community and people in need. To help, we developed a concept called the Family Council. The concept is simple. You tell your children that you are establishing a family council and they are members. You establish the goals…in our client’s cases, it often centers around charitable giving. You set the structure such as when and how often you’ll meet and what the agenda/goals will be. Then you use these meetings as teaching moments. Let’s look at an example of how this might work:
We have a client (couple) with significant wealth and children both in college and having graduated. The kids are starting to spread out and ‘leave the nest’ and the parents would like to create a mechanism for bringing everyone together periodically in a structured and meaningful way. They loved the idea of the Family Council and decided to use this idea around charitable giving because they wanted their children to understand the importance of giving back. We are setting up a private foundation and the parents will fund it with several hundred thousand dollars initially. At least once per year the whole family will get together at a fun location (such as a ski vacation) fully paid for by the parents. They’ll meet and together decide what charities receive a portion of the gifts. Everyone gets to choose a charity but must ‘tell their story’ about why they are passionate about this particular charity. Ultimately a good portion of the parent’s wealth will go into the family’s private foundation at the last of the parent to die and the children will manage the foundation for decades into the future. Think of the tremendous lessons here:
- The children learn the importance of helping others who are less fortunate through charitable giving.
- They learn to research their own charities and learn about other siblings’ favorite charities.
- They become closer and more connected to their siblings and have a reason/purpose to get together annually in a meaningful way.
- These adult children are now moving in charitable circles and meeting other philanthropist. My experience is that people who focus on giving to others are most often great people…people of good character and movers and shakers in the community.
All of this happens because the parents are deliberate about what values they would like to pass on to their children.
This family is very wealthy, but do you have to have lots of money to use this, or a similar, strategy? Absolutely not. Here are a couple of alternative ideas:
- If you’d like someone to handle all the administrative duties for you (sending out checks, vetting charities, investing your funds, etc.) you could use a Donor Advised Fund (DAF) with a non-profit such as the Community Foundation of Greater Birmingham. Here you open an account in your family’s name; make a tax-deductible deposit; and then, via online requests, have them send money to your designated charities.
- Even more simple, you can simply set up a savings account, deposit funds for giving at a later date and, as the family decides what charities they want to make gifts to, you write the checks.
- Instead of giving money, as a family, you could give time serving together at a charity such as Community Kitchens of Birmingham.
What are the values that you’d like your children to possess? Now figure out the best way for you to communicate those values to them and set your plan in motion.