I have seen how money ruins families," says Louise Marie Cole, CFP, principal partner of Heritage Group of Companies in Toms River, New Jersey, and an advisor for more than 26 years. "As an individual it's easy to decide who gets the money and when, but if you are part of a family, the dynamics change. The conversations about values and things they want to see are missing in today's fast-paced world."
Most parents hope that if they instill the right values in their children, the kids will grow up to be happy and fulfilled. But in many cases, we don't do a good enough job of teaching them how they can use money to make a difference in the larger world, and how philanthropy can add meaning to their life.
No matter how much wealth a family has, helping the younger generation learn these lessons is an important part of planning for the future. Tom Rogerson, managing director of Family Wealth Services at BNY Mellon Wealth Management in Boston, often refers to it as "the other side of estate planning." He says, "It's not so much how do you prepare your money for your family, but how do you prepare your family for your money?"
STRENGTHENING THE FAMILY
"Families that stop and discuss their philanthropy with their children–whether it's helping at the local food bank or donating time in a myriad of ways–are far better off as a family," says Cole. "For me, there is nothing better than a good heated family discussion as to which charity should get this year's donation. It may be the only time the family becomes whole. It's extremely rewarding to me as a facilitator to see once-selfish individuals rationally discussing charities that may get the money anonymously."
She points out that instead of just telling clients to use charitable deductions as much as possible, advisors can suggest using these opportunities to teach children how families make decisions and how philanthropy benefits everyone. "If you know you are going to give a certain amount to charity, why not decide as a family where you want the money to go and then create a learning opportunity for the children?" she asks. "You can get your personal message across about which charities you espouse, and perhaps learn about others that your children would like to help. It may be the one thing you do as a family that will keep your kids there for you when you get older."
PARLEZ-VOUS PHILANTHROPY?
But how do you bring up this subject with clients? Here's a suggestion from Barry Kohler, an attorney and chartered financial consultant who works with a number of high-net-worth families at BDMP Wealth Management in Portland, Maine. "When clients are going to have a federally taxable estate, I start by telling them that they can leave what they have to their family, to a charity or charities, or to the government–and the bad news is, they have to choose two of these three," he explains. "Once the clients understand that, they say, 'Oh, tell me more about the charitable part,' because clients like to direct their social capital to causes that are important to them."
Kohler probes further during the planning process. What are the clients' values and attitude towards charitable giving? Have they tried to pass these on to their children? If so, how? By instruction or by example? The result of this exploration, he says, is "a conversation that helps me understand the culture of the family around philanthropy."
"Many wealthy clients find out about family retreats and say, 'Let's have one!'" Rogerson says. "The problem is, they introduce philanthropy too early." He goes on to explain, "Many of these entrepreneurial types are used to making decisions and then telling the family what their roles will be. That doesn't work. Before you introduce philanthropy, you've got to create a sense of 'we.'"
In the workplace, these business owners may know how to get a group of unique, strong, independent individuals to work together as a team. But they haven't built a team at home–a vital element in ensuring the family's survival.
At BNY Mellon, Rogerson follows a five-step process to help family members learn to work as a team. In step one, the entire family discusses issues related to their wealth: making it, losing it, spending it; the impact of spouses, gender, birth order. In step two, the group identifies family members' different communication styles, and explores how to use these styles as an aid instead of an impediment to progress. Step three is a values test: "Now that we understand what the issues are and how to talk about them, what are the values we want to transmit?"
Step four (at last) is charitable giving. "Ideally, we get the children to participate in the design of a family philanthropy," Rogerson says. In step five, the family learns to engage in healthy self-governance, making decisions on such wealth-related issues as fairness and what lifestyle level should be financially supported. "We don't want them to try to deal with those issues on day one," he points out. "If they hold off these discussions until step five, they will generally be able to approach them with a more cooperative and long-term perspective."
HOW SOON CAN KIDS START LEARNING?
Some authorities recommend waiting to encourage philanthropy until children are past the "me" period of the Terrible Twos. Rogerson, for example, finds that "the only time you can't engage family members in some kind of a process is from birth to three years old."
In my experience, though, little kids are often natural givers. Szifra Birke, a wealth counselor in Chelmsford, Massachusetts, points out that a common example is the baby in the highchair who wants to feed you her Cheerios and smiles as you enjoy the gift, or the tot who shares his snack with the dog. "Some studies suggest that primitive forms of empathy may begin at age one or two, such as kissing a parent's hurt finger to make it feel better," says Birke. "Pleasure in giving can start quite young."
Peg Downey, founding partner of the fee-only advisory firm Money Plans in Silver Spring, Maryland, notes that at the age of three her daughter Colleen decided to give away her holiday gift money to the county's elderly poor. Young Colleen's desire to "help grandmas and grandpas who need it" was quoted (and applauded) in the local newspaper.
"Philanthropy can be taught at a very early age," Louise Marie Cole says. "Experiences should be age-appropriate–multiple small lessons allowing a child to feel how good it is to give. For example, you might hand a young child two cookies and then ask, 'May I have one of your cookies?' Your acceptance of the gift, and the big deal you make of it, is philanthropy in action. That child will enjoy the feeling of having given, even if you choose to give the cookie back."
