This as told essay is based on a conversation with Ken Polk, 53, living in Birmingham, Alabama. He is the founder of Arlington Family Offices. This has been edited for length and clarity.
I believe most Families think about inheritancebut many don’t really talk about it.
Whether your children receive $100,000 or $100 million, it doesn’t really matter. The challenge is the same: if you know this meteor is entering your children’s universe, you have to prepare them for it.
I recommend a process that starts in childhood and evolves as your children grow. I’ve been through it personally with my four children, who are now 27, 25, 23 and 21, so I speak from experience.
These are the three steps I would recommend to any parent.
1. Build character before talking about legacy
People often talk about wanting their legacy to continue. Ultimately, preserve legacy amounts to that of a child character and who they become.
One exercise I recommend is to ask your child to identify eight character traits he or she aspires to, and then write a letter to their future self. It’s about helping them work backwards from the person they want to become.
When it comes to preparing a child for an inheritance, I believe the ultimate gift is helping the child find their purpose in life before the money arrives.
2. Teach your children financial habits
I think you can also teach your children financial discipline as early as six years old. It can be as simple as teaching them to divide their money into three pots or envelopes: some for giving, some for saving, and the rest for living. I call it the undefeated financial plan.
Six years after my kids got their pots, they came with me to open bank accounts when they turned twelve. By then they were using the same “give, save, live” system with their accounts.
You don’t need everyone in your family to become great investors, but they do need a shared framework making financial decisions. As children learn to handle smaller financial decisions, you can gradually entrust them with larger financial decisions. This will help them prepare for the point when you can start discussing what they might inherit.
3. Explain what they inherit and why
Once you’ve done that work at different stages of your children’s lives, you can begin the disclosure process between the ages of 19 and 22. Then you begin to walk them through the family’s finances and talk more openly about their inheritance.
Part of it is what we call a legacy letter, which we help families write. It’s not about letting your adult children be boring trust and estate documents. The key is to draft an old letter that makes clear the ‘spirit’ of the money.
If you give someone a check and say you want to use it for something like education, that is the spirit behind the money. The same principle applies to an inheritance.
I did this with each of my four children. Their mother and I sat them down and explained that there was a reason we had taught them systems like giving, saving, and living. We looked to see if they could do that settle the inheritance they were about to learn more about it.
Ultimately, parents must be willing to let go. You should let your children make their own financial decisions when they get married, start their own families or branch out.
The key is teaching a system that is rooted in shared values and principles that can be passed on. Live these values yourself, pass them on to your children, and create a legacy that will last.
