Appropriate Wealth and Resource Transparency with Adult Children

by Jerry Inglet, Ed.D., Certified Financial Therapist-Level I™ Practitioner
Wealth Transparency with Adult Children photo

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

What if, as a parent, your overriding hope for your child was that they were happy, productive, and kind. Developing this “what if” further, let’s add the caveat that you have set aside resources for this child that could be life-altering but chose not to disclose that information or disburse these proceeds to them until they were older than forty. Unaware of these resources, this child pursued a college education and a career in a field that paid them well but left them unfulfilled and uninspired. If they knew about the resources earmarked for them at an earlier age, they might have pursued a career aligned with their passion – even if that profession paid them less than what they earn today. Does this scenario alter your thoughts on transparency and wealth?
Here is another “what if” to ponder. What if you decided to provide more resources upon your passing to one child over another, and this was based upon the imbalance of funding you provided during your lifetime. In essence, you decided to give more money to the child that got less during your lifetime to achieve an equal distribution. But the child that received less at your death had no idea that they received more during your lifetime. Does this scenario alter your thoughts on transparency and wealth?
What if throughout their entire childhood, your children grew up with a lifestyle that included multiple vacations each year, private education, heavy allowances, and sustained and supported opportunities at every turn of their youth. Upon your passing, you decided to distribute 99% of your wealth and resources to a charity without your children knowing your intentions. Does this scenario alter your thoughts on transparency and wealth?
There is also a flip side to these “what ifs” that could support less transparency.

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?

These what-ifs, these very plausible what-ifs, can turn into devastating what-nows. Parents who contemplate the what-ifs and understand the potential what-nows are confused and overwhelmed on what levels and steps are appropriate to take when engaging a wealth and resource transparency path, especially with older children.

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.

Every time I hear someone respond with an “it depends,” it immediately seems like an out, a side-step to the question. So let me at least try to provide foundational principles that many families can consider:

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.

If you are committed to entering this space and do not know where to begin, bringing in a third-party facilitator or adding this function to your family office can be advantageous when the facilitator is both sensitized to the concerns of the parents and possessive of the competencies needed to help navigate families through this process.

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?
Based on the evaluation of the child’s readiness using questions like these, the revelations or transparency that follows the education and communication cadence is often focused on uncovering legal wealth structures and their flow of execution without figures or dollar amounts. These structures can be complex, and the explanations can be co-facilitated by the legal team that drafted the trust or other legal documents so that the collective family can grasp both the chain of events upon the movement of these resources and the thought and intentions of the parents that went into drafting these instruments.

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.

That transparency timing, built on understanding the maturity of the children, is indeed a variable that differentiates from family to family. But thoughtful, intentional preparation for this path is certainly more universal for families that want to mitigate precarious “what-ifs” that can lead to tragic “what-nows.”

Reviewed May 2022

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