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Money Conversations with Adult Children

Adult Children

The conversations you had with your children when they were young are different than the ones you have with them as adults. Eventually, your children realize the extent of your wealth and it becomes more important to approach these discussions intelligently. This may affect how you manage your assets, and how you might decide to transfer your assets to a future generation.

Considerations for a Common Yet Complex Issue

It’s not uncommon for parents who have grown their wealth substantially over the years to involve their adult children in money decisions. For example, according to Pew Research in 2015, 61% of parents in the US have helped their adult children financially in the past year, and that number increases to 73% for households with higher incomes.

Here are five common areas to focus on when it comes to money conversations with your adult children.

  • Lifetime Gifting: When helping adult children financially, you have two options. Either pass your wealth down through an estate after your passing, or gift portions of your wealth while you are still alive. If you decide to gift portions of your wealth instead of using an estate, you can gift up to $15,000 per year, per child in 2020. Or you may opt to gift stock or other liquid assets, which can then be liquidated by your children with potentially fewer tax implications than if you had sold the asset and gifted cash instead.
  • Charitable Causes: If your children support or are involved in a worthwhile cause, you may decide to donate to their favorite charity, or set up a Donor Advisor Fund. This allows you to create a multi-year donation plan while receiving an up-front charitable tax deduction. The DAF approach gives you the opportunity to review the investments in the fund and decide which causes to support.
  • Business Investment with Family Loans: Your adult children may be passionate about something and want to start a business. If that’s the case, you could provide them with seed money or a business loan to get started. Loaning your child money is a simple way to transfer wealth, especially if you’ve already reached the annual $15,000 gift tax limit. Loaning money to your child provides them an opportunity to invest the loan at a higher rate of return than the interest rate you charge. Be sure to create a formal promissory note, and track payments. If not, the IRS may consider the loan a gift, creating additional tax implications.
  • Your Children and Wealth Manager: It can be beneficial to introduce your adult children to your financial advisor and involve them in money conversations. Even if you don’t want to share the full extent of your wealth with your children, providing them with a valuable resource will help them make smarter financial decisions in the future.
  • Health and Wellness: What are your future plans for your own health and wellness? It’s important to have these conversations with your adult children. This includes housing as you age, as well as the extent of care you wish to receive in old age.

There’s no cut and paste strategy that fits every household when it comes to money conversations with adult children. There are many variables to consider, including how many children there are, their medical needs, and their ability and interest in discussing finances. A financial advisor will work with you and your family to develop a strategy that makes sense for your situation.

Learn more here about Modera Wealth Management LLC and our Atlanta advisors

Modera Wealth Management., LLC (“Modera”) is an SEC-registered investment advisor with places of business in Massachusetts, New Jersey, North Carolina, Georgia and Florida. Modera may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. SEC registration does not imply any level of skill or training.  For information pertaining to our registration status, fees and services, please contact us or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov) to obtain a copy of our disclosure statement set forth in Form ADV Part 2A. Please read the disclosure statement carefully before you invest or send money. 

This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.

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