When to Tell the Kids About Your Money

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How to create good stewardship of your legacy

There are few topics that create as much anxiety or are more taboo than talking about money. This goes double for family business owners who are deciding how much money to leave their kids. In many cases, the necessary discussion around inheritance and legacy is pushed off until it’s almost too late, ending in a painful process for parents and children alike. And while it may sound like a silly problem, the decision regarding money—and whom or what you will leave it to—is fraught with well-founded fear. In many cases, parents don’t want to damage their kids’ work ethic by giving them money or promising them a large sum in the future. It’s a valid concern, especially for family businesses who intends to transfer leadership to their children. But it’s not an excuse to put off the conversation. Honestly, as always, is the best policy. The discussion around money is particularly a problem for first generation wealth, where the concept of having money to leave behind is new—and no one has ever had the conversation about it. If you’re a family business owner who is eyeing retirement and beginning to plan your legacy, how do you talk to your kids about money, and when do you do it?

Start With Intent 

More important the questions of who gets your money, and how much they get, is the question of what you want. How do you want your money to be spent, or invested into your business or community? You’ve spent a lifetime building your wealth, and now it’s time to put it to work in the way that you wish. Whether that means giving a portion (or all) to charity, starting a foundation in your name, helping your kids and their families, or simply putting it back into the business that you’ve built, it’s your money and ultimately your decision on how it should be spent. Spend time thinking about your intent and planning your intentions.

Assess You Children

Every child is different. Before you commit to any inheritance for your kids, you must assess them. Are they hardworking, productive members of society who you can trust with an inheritance? Do you believe they will take advantage of the money and ultimately blow it all? Do you trust them to run your business? Do you trust their spouses? Assessing your children can be painful. As a loving parent, you never want to judge your children’s worth. But it’s an important step that you must take if you are going to be comfortable with your decisions. 

Consider Your Timing 

After you have made your intentions clear to yourself, it’s time to have the conversation with your heirs. Your timing will vary depending on a variety of factors, but earlier is better than later. If you’re coming up to a liquidity event, start having the conversations as far out from the event as you can. If you have generational wealth, the conversation about money can start as early as childhood. Early is always the right time to start, assuming you have your intent solidified. By starting the conversation early, you’ll prepare your kids for what is to come—and give them time to plan accordingly.

Be Honest—And Create Trust

The hardest part about having a conversation with your kids about inheritance is being honest, Completely, unsparingly honest. But providing this level of honesty is your responsibility and will lead to good stewardship of your money and your wishes. Ask your kids questions—what do they plan to do with the money? How do they plan to care for you as you age? What do they want out of life? And share your expectations for their inheritance as well. Being honest will ensure that your children take your wishes—and their responsibilities—seriously. And in cases where the children are receiving a lesser amount than they imagined, brutal honesty may hurt, but it’s necessary to let your kids know where you (and they) stand. Of course, this conversation should happen more than once—have as many conversations as necessary to ensure that all parties are satisfied with, or at least understanding of, the situation.

Having an honest conversation with your kids about money and inheritance may be painful, but it’s the best inheritance you can leave them.

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