Introduction

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

Warren Buffett

You’d never guess it, if you sat down with the two of us in one of our offices. We’d greet you in professional suits, our degrees framed on the wall, a list of professional accolades discreetly displayed on certificates and plaques. We’d speak to you in calm, level voices, and we’d both look at you through our wire-framed glasses.

Most of our clients would never imagine we used to cruise the Midwest on a Harley Davidson motorcycle. In our early marriage, we loved adventuring together. We explored countries abroad, and then roared around the Great Lakes when we got home.

That is—until Anna was born.

Anna changed things. Rather than associating the Harley with a carefree cruise down the highway, we suddenly associated it with worst case scenarios. What if one of us died on that motorcycle?!

It didn’t end there. The two of us are both financial advisors, and we’d spent most of our adult lives working to build our wealth. Pre-Anna, we’d thrown all our financial efforts into growing our retirement, or savings, or real estate investments. We cared about ourselves. Who else was there to care about?

Then, there was someone else to care about. Becoming parents felt like a gravitational shift; our perspective on everything expanded. We had to learn to be more selfless during late-night feedings, and diaper changes, and bleary-eyed mornings. We saw the world in new ways as we took our first walks with Anna, imagining things through her eyes. All of a sudden, everything our parents and grandparents taught us came to light. It was now our turn to provide purpose and a sense of financial security.

Our vision of wealth expanded too. We went from envisioning a future that only included the two of us, to a desire to allocate savings for our children—and their children. One of the first actions we took after Anna was born was opening a 529 college savings plan for her future education.

Then a fourth person joined us when Will was born—and then a fifth, with Jack. Now that Anna is old enough to observe our financial choices, there’s even more to consider. We used to just set aside money for her. Now, we’ve realized, we actually need to teach her what to do with it!

Besides a financial education, there was still the Harley factor. What if one of us died? What if both of us died? How would we make sure our children would be taken care of? How would we pass on our values? How could we perpetuate the wealth we have built? It was no longer enough to simply worry about ourselves. We had to start worrying about these precious lives we’d brought into the world as well.

Why Pass It On

Kids change things. As parents with young children still in the home, we live out this fact every day. But as financial advisors, we know the considerations don’t stop when the grown up kids move out. Many parents want to provide for their children over the course of their entire lives. Even after death, parents hope to pass on their wealth and values to their kids. They want to do everything possible to ensure their future generations enjoy security, fulfillment, and opportunity.

With our own children in mind, this book offers observations and tips that we’ve gleaned from our experience as financial advisors. It aims to help families effectively pass on their wealth, values, and financial literacy to future generations. We don’t want to “pass it on” merely to perpetuate wealth—and from our experience as financial advisors, we know that’s the case for most families. For most of us, passing it on aims to accomplish much more than that:

1. It’s about providing financial security to our children in the event of an untimely passing.
2. It’s about reducing financial constraints, so our children can pursue their passions and avail themselves of opportunities to grow.
3. It’s about teaching our children the rewards of making a perpetual impact on family and community.
4. It’s about promoting and facilitating creativity and entrepreneurship.
5. It’s about teaching our children and grandchildren to recognize their good fortune, so that they’re inspired to live with gratitude and generosity.
6. It’s about learning to take a long view with the time horizons on our financial goals, ensuring that our strategy (and emotions) can weather short-term market volatility and set future generations up for success.
7. It’s about educating our kids in financial literacy, ensuring they know how to avoid destructive financial habits and practice healthy ones.

In short, for us and countless other families, passing it on means setting our kids and grandkids up for success—not just financially, but in terms of their values, habits, and available opportunities.

Passing on Wealth: Success or Self-Sabotage?

We work with families in nearly every stage of life, from elderly grandparents who want to solidify their estate plans, to young adults who are just beginning to think of establishing financial security for their young children. Often, we work across that span of generations within the same family.

There’s never any shortage of good intentions; parents nearly always want to care for their children and subsequent generations in a loving way that blesses them financially. Often, those good intentions are paired with wise financial stewardship—when the older generations thoughtfully, deliberately, and intentionally help their younger generations learn about money and take up the Family Vision for wealth. However, sometimes the good intentions can lead to pitfalls in passing on wealth. These pitfalls can easily set heirs up for failure rather than success.

Sometimes, we see parents with kids still at home focus both on financial security and financial education. They set up college funds and life insurance, while also educating their kids financially. They give their children practice in investments and money management. They teach their kids that the money is not principally for their own enjoyment—it’s also to share, and give, and pass on to future generations.

But we also see other parents who, despite their best efforts to do everything right, are not having discussions with their kids about how to handle finances wisely in the future. The focus is simply on providing for them. In the midst of all the soccer games and ballet lessons educating them in financial literacy is a lost priority. These families have helped us realize that financial literacy is something you have to intentionally build into your children’s experience.

We’ve learned from parents further down the line, as well. Many of these parents funded their children’s activities when they were young, and they now feel the natural desire to continue sharing their good fortune as the kids become adults. We can see how emotionally rewarding it is for our clients to gift potentially large sums of money on a regular basis to their adult children during the college years, into marriage, and throughout their adult lives. (Often, these gifts can be a smart financial strategy as well, helping to reduce future estate taxes.)

Sometimes, these financial gifts lead to all good things. We see parents with adult children intentionally communicate with their kids about financial gifts and expectations. These families know it’s okay to talk about money. They don’t hide their financial dealings from their children—they discuss it at an age-appropriate level. Rather than being ashamed of their wealth, or flaunting it with enormous purchases that drain their net worth, they use it. They save, they spend, they invest, and they give. For the most part, we see these children turn into prosperous, successful adults who live meaningful lives.

But sometimes, we see these financial gifts go awry. Any number of variables can turn these well-intended gifts from wealthy parents into a stumbling block for their adult children—a lack of open dialogue, financial literacy, or even a persuasive spouse can lead the recipients of those gifts to spending choices that the parents wouldn’t agree with. Unbeknownst to the parents, those gifts could be funding a drug or gambling habit, encouraging living beyond their means, spendthrift behavior, and so on. These are real risks that warrant scrutiny. Often, the adult children can come to depend on financial gifts from their parents. Instead of developing maturity as a financial steward of the family wealth, they develop enabling behavior.

We also see benefactors at the end of their lives, doing their best to sort out how much to give, and to whom, and to what, and when. Sometimes, this is a gratifying experience, as parents affirm the wisdom and responsibility they’ve seen in their children. But other times, we see these elderly parents rearrange their estate plans, as they anxiously express concern that their children haven’t developed disciplined financial habits. They want to continue providing for their family but recognize that...