Financial EducationIt is summertime, vacation time, and transition time for families and their children. For youngsters it may mean preparing to start school, to change grades, or even change schools. For teens it may be reaching milestones such as going to middle school, starting high school or college. Regardless of the stage, there are important lessons and information that will not be taught in the classroom, but will be the responsibility and privilege of the family. Besides religious values and personal ethics, financial information, attitudes, and habits will likely impact the rest of their lives.

Children develop spending habits early on, sometimes absorbing unspoken lessons from the adults in their lives. Wise parents find “teaching moments” to help guide them. Unfortunately parents sometimes underestimate what their adolescents are prepared to learn. One important example is the failure of parents to speak of family wealth or the family’s estate plans.

Suppose the family has moderate to substantial assets that will be transferred to a son or daughter at age twenty-five if the parents pass away. Some parents are concerned about discussing this fact, fearing that their child will count on these funds instead of working to develop their own career and earning power. But is it reasonable to think a child should suddenly be prepared, at age twenty-five or even thirty with no previous training or planning? Of course, always make it clear that any inheritance is never guaranteed. I know people that I went to high school with and thought were rich because their parents were rich. They are still waiting for their parents to pass away so they can be rich. They had no incentive to work because they felt they were entitled to have money handed to them.

Even if the family’s assets are modest, their teen should understand what to expect. If their needs have always been met, a child may think their parents have more assets than they actually own. They may not be aware that there is a heavy mortgage on the home, or that an unexpected event or investment failure has eaten into the family’s savings. This is important information for the adolescent to know, to learn from, and to include in future plans.

The teen years are a time for serious consideration of ones future. It is also an ideal time to introduce information and discuss values pertaining to money management and family wealth transfer. This is also true if a family owns a business.

If a business is involved, parents must surely assess what role, if any is available for their offspring. They must also closely observe and consult with each child about their preferences. Businesses do not run themselves and they do not run themselves well unless the people running them are well suited for the job. Being honest with yourself and your children will assure you of making a good choice about how the business will be handled after your death. It may be better to sell a business than to leave it to someone who does not love it or have the right attributes and training to run it well.  Only open and honest communication can help you make these important decisions and plans.

Remember too, that when your adolescent reaches age eighteen, there are some additional steps that need to be taken whether or not they are leaving for college.

  1. Get appropriate HIPAA release form(s) signed so that you can get medical and healthcare information in case your child is unable to communicate. Up until age eighteen, a parent can get information from doctors or healthcare providers. After a child reaches age eighteen, parents can only obtain information if the patient is able to consent or in some cases with a court order. Obtaining such an order may take excruciating time if your son or daughter is in a coma or unable to communicate.
  2. The newly minted adult will also need to have a Durable Power of Attorney. As an adult, your teen’s business affairs are private. In case of incapacity, you may need to pay bills such as rent, car payments or credit cards in order to avoid negative consequences. The Durable Power of Attorney would allow you to access the necessary information and take action.
  3. It is not too early for your son or daughter to start an estate plan. That plan needs to be only as simple or complex as the circumstances dictate. Even if the assets are meager, an Estate- Planning Lawyer can help you avoid overlooking something important. The training will also be invaluable.

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