See how developing a wealth transparency plan can benefit your family.

What if, at the age of 18, your child became aware that they would inherit millions of dollars at different age increments starting at age 21. Because of this transparency, they dropped out of college and leaned into a crowd that didn’t necessarily bring about your child’s best qualities. Does this scenario alter your thoughts on transparency and wealth?

As much as everyone would like to have a definitive answer or information on the perfect transparency process that works for all families, this simply does not exist. All families are different. Even within a family, the maturity levels of children are varied, financial competencies are wide-ranging, and everyone within the family has a different relationship and path with money. So, navigating this path of appropriate wealth transparency becomes an “it depends” type of journey for each household.

First, parents could agree to dedicate consistent time and energy to wealth transparency planning. Maybe not as much when compared to tax planning, investment planning, merger and acquisition planning, or whatever mechanization of making, growing, and retaining resources you currently find essential, but this subject (wealth transparency planning) deserves and needs your attention. Developing a wealth transparency plan is critical to creating any other type of plan that benefits your family.

Whether led by a facilitator, a family champion, or a member of your family office, many families take an initial step with financial literacy as the foundation, ensuring that family members are prepared for all the revelations you plan to provide. Because without an understanding of the key terms and concepts of finance, money, and wealth, measures of wealth transparency without this context will not fully sink in when there is a lack of depth and comprehension. This initial task may require some ramp-up as many families are often at different stages of understanding these matters.

Next, consider employing consistent, age-appropriate, finance-themed conversations that use diagnostic tools to increase comfortability and cadence for these family discussions on finances. A few diagnostics appropriate for adult children include the Klontz Money Script assessment and the University of Missouri Investment Risk Tolerance assessment. The evolution from financial education to comfortable generalized financial discourse can set the stage for acts of transparency once that proper foundation is in place. The overriding “it depends” on progressive transparency is often relational to the maturity and responsibility of the children. Here are a few prompting questions that can help parents during that evaluation to uncover if a child is ready:

• First, how sophisticated are the financial questions posed to you by the children, and how emerging are these inquiries?
• What level of discipline and/or restraint do the children show in their own budgets, and what is their history of delaying gratification?
• How often do children reflect on purchases they complete where they ponder the utility of the transaction. In other words, are there moments of growth resulting from buyer’s remorse, or are they on to the next transaction without reflection?
• And last, what type of interest and action have they historically demonstrated in becoming financially self-sufficient? Are they becoming increasingly financially self-reliant with time?

When the structures are understood, children often progress to a place of interest in the dollar amounts attached to these structures. This is where, once again, the children’s maturity, responsibility, and relationships are gauged to see if they are prepared to learn the detailed metrics. It also requires a leap of faith for the parents to make that reveal.

Related Articles

• 6 Things to Discuss With Adult Children Before Leaving Them an Inheritance
• Involving Adult Children in Your Financial Planning
• Providing Equal Financial Assistance to Adult Children

Reviewed May 2022