Money or memories: Tips for your family legacy

7:48 AM, Aug 27, 2018
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The United States sits on the doorstep of the greatest intergenerational wealth transfer in human history. During the next three to four decades, the baby boomer generation is expected to pass along about $30 trillion in financial and nonfinancial assets to their children and grandchildren, according to consulting firm Accenture.

While having the ability to pass along a financial legacy seems like a good thing, for many it can be a source of stress, concern and worry. When parents die, division of their remaining assets frequently ends up being the catalyst for family frustration, anger and contention.

To minimize the drama, here are some tips to help you determine the type of financial legacy you want to leave.

Take care of yourself

“It's your money, so how compelled should you feel to save it to benefit someone else?” said Johnathon Pond in an article for AARP. “No one needs or deserves your savings more than you. If you can simply avoid becoming a financial burden on your children or other family members, you've accomplished something wonderful.”

Pond explains some parents end up impairing their financial futures because they feel obligated to provide financial assistance to adult children.

Build some memories

Instead of letting unneeded assets accumulate, consider spending money now on activities or things that can bring your family closer. Take your children and grandchildren on a vacation getaway. If you can afford it, do it regularly.

A study done at Purdue University found family vacations contribute positively to family bonding, communication and solidarity. Time spent together building family memories and isolated from ordinary everyday activities like work and school help build positive connections.

The Purdue study found even though family vacations create stress, the benefits of the shared adventures outweigh the risks, even in families that are not particularly close.

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Be generous

You don’t have to go to Disneyland to make shared memories. If family circumstances allow, talk with children about doing something together to benefit charity. You don’t have to be a Rockefeller to make a difference. Even if you don’t have the financial resources to build a hospital wing, you might be able to fund a scholarship or make a substantial donation to a food bank.

Involving children in discussions about where to allocate funds can help them feel like they are part of the decision-making process.

Provide incentives

Incentive trusts are designed to reward children for accomplishments, rather than just giving them a large sum of money. One example cited in an article for forbes.com “calls for trust distributions that match the child’s income. If Suzie makes $75,000 from her job, the trust will distribute to her $75,000 each year. If her younger brother Johnny spends too much time playing Xbox and only makes $22,000 a year, the trust will distribute just $22,000 to him.”

Incentive clauses can include payments for things like graduating from college, getting married, reaching a specified age, etc. One potential concern is, if the requirements for meeting the incentive are too stringent, it could quash motivation and foster resentment.

Ultimately, you choose whether to leave your children a hefty bank account or spend the money to help provide experiences that build shared memories. In either case, with proper planning, money can be something that enriches the lives of your family members and deepens the connection between generations.

 

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