Assets for Heirs or Heirs for Assets?
Our clients often have us look at their balance sheets and ask if there is anything we recommend they do differently. Our answer is generally, yes. The reason we say that is because people have often overlooked the human capital issues on their balance sheet—and that means focusing on their heirs. You can’t manage your estate from the grave, so readying your heirs for the future is critical. You can spend years preparing your assets, but if heirs aren’t financially literate, lack maturity, or are spendthrifts, then the composition and structure of your assets will be of no benefit.
That’s why we encourage our clients to follow the three “Es” as a way of preparing their heirs.
The first “E” is an Estate plan designed by you. Creating a plan that is perfectly tailored to your family is one of the best things you could ever do for your family. Think of this step as laying the foundation of a house. Once there is a solid plan in place, it can serve as a guide for future generations and as a reminder of your family values.
The next “E” is Engage the next generation in your lifetime. We can’t stress this enough. Get your kids engaged with your family’s finances early on. Have your children involved in family meetings, consider self-managed investment accounts, use philanthropy as a teaching exercise, and focus on creating projects for your kids to work on together.
The third and final “E” is Educate them as much as you can. Nurture their curiosity. Encourage them to ask questions. Bring them to meet your advisor and let them ask your advisor questions. The time for education isn’t once your gone—the time for education is now. Assets need to be prepared for your Heirs, and your Heirs need to be prepared for the use of those Assets.
