It was a busy week in Florida. I attended my son's graduation from veterinary school, met my engaged daughter's future in-laws for the first time and celebrated my dad's 93rd birthday with a family dinner that included our three generations. Along the way, I managed to plow through the book "Wealth in Families" by Charles W. Collier.
The purpose of the book is to offer advice on how to handle money and estate planning issues when families have sizable estates to pass on to future generations. Fortunately, that's one problem I don't have. My interest in the book was purely academic. However, there were some kernels of wisdom that would apply to any family and to an estate of any size, however modest.
Real family wealth, we should be pleased to hear, has little to do with money. The true assets of a family consist of the values and the shared dream of what they want to accomplish over the years. As a really wealthy friend of mine once put it, "the only real security anyone can enjoy in life comes from the ability to do something and do it really well."
Most parents want their children "to be happy." But what does this mean? In fact, the book points out that in the end what we all care most about is much deeper than financial wealth. "To be really rich is to be rich in achievement, rich in experience, and rich in friendship."
This book is full of ideas about how to handle the issue of money within a family, but a few of the basics are as follows: 1.) focus on the human, intellectual and social capital of family members. I take that to mean reading to your kids and making sure they do their homework and have extra-curricular activities no matter how much money you have. 2.) Work on improving intra-family communication, 3.) Tell and retell the family's important stories, 4.) Give younger family members as much responsibility as they can mange as soon as possible.
When it comes to actually distributing money, a general rule of thumb is to not do too much gifting until children or grandchildren are in their late thirties --- established in life as a result of their own accomplishments. Paying for education would be an exception to the rule.
The key question is how to train children to handle money beginning at early ages. High-achieving parents can find that the skills they use in business, such as insistence on perfection and maintaining a sense of control, don't translate into useful lessons for children when it comes to teaching responsibility around money.
"No Corvette unless you have at least a B plus in Chemistry" is hardly instructional. Children from 13 to 18 should have summer jobs, a budget, a tax return, a lesson in consumerism and credit cards, a few investments and some giving to charity. For college students, insist on summer employment, living on a budget and getting some advisor-facilitated learning about investments.
Estate taxes are largely voluntary. While they have temporarily disappeared anyway in a misguided attempt to do away with them completely, they will now return in 2011 in what is termed the "Throw-Mama-from-the-train" act. They will be returning only for larger estates, but many Americans who own houses free and clear as well as retirement accounts and other assets will be wrestling with estate tax concerns that have not been a factor for the last several years.
Gifting programs dramatically reduce what you might someday owe the government, and giving assets to charities while retaining an income interest for life can actually increase retirement income. Family foundations, thought to be only in the province of the super rich, may become far more prevalent for what would be considered as relatively small estates.
It's reassuring to know that when it comes to handling money in a family, there is no shortage of good information available. Thanks to many books on the subject, there is no need to reinvent the wheel. Fortune magazine once speculated that the transfer of wealth accumulated by the "Great Generation" was in the trillions, but our new president is floating the idea that the first $3 million for any family will be estate-tax free. Whew. This means that most of us will dodge that estate tax bullet, leaving us with more planning time to focus on the non-financial expressions of true family wealth.