Baby sitting on money

Money can be an uncomfortable, negative or even taboo topic for families. So when it comes to parents telling their children about an inheritance, local financial advisors say ‘the right time’ is different for every family.

Depending on the child, the financial gift can signal a windfall or a burden. While telling a child who is too young can result in a lack of discipline, motivation and appreciation, sharing the news too late can leave an heir unduly concerned for the future.

So advisors say sharing the details of an inheritance can wait, but note that it’s never too early to talk to children about money. “Start talking to your children early about simple things—saving, spending and charitable giving,” says David Ott of Acropolis Investment Management. “Hopefully, you will raise them to have the right attitudes about money in general, so if and when you do let them know about an inheritance, they are more ready.” To instill childhood lessons about money, parents should watch for teachable moments during everyday life. “When a child asks for pricey toy, don’t say yes right away. Explain you can pay half if he or she pays half,” says Maurice Quiroga of PNC. An allowance, as well as matching your child dollar-for-dollar in a college savings account, also can help them begin to understand finances, adds Donald Kukla of Moneta Group. In addition, advisors note it is crucial to discuss philanthropy. “Talk with them about why you work hard to give back money, such as church donations,” Quiroga says.

According to a 2011 SmartMoney report, 52 percent of parents with assets of $3 million or more have not discussed finances or how they should be used with their children. For many families, a good time to discuss an inheritance is when a child has become a financially independent adult—living, working and paying bills on their own. “Be frank, open and honest, and make sure you share your family values related to finance, along with the facts about the actual money,” Ott notes. Key facts to discuss include the name of the executor of the estate, financial, tax and legal advisor contacts and the location of important documents and safety deposit boxes, notes Brian Pultman of Wells Fargo Advisors.

A wealth management firm can help ease the transition through a series of meetings at different stages in the child’s life. “It’s not just one conversation, but a long-term process of educating children to become financially literate,” says David Krauss of Commerce Trust Company. In addition to financial advisors, many local firms have psychologists available to help counsel families through the process. A godparent, aunt or uncle can be another resource for the child to discuss a large wealth transfer, Quiroga adds.

Advisors also can help families avoid financial missteps. For example, Krauss cautions parents against creating undue expectations in today’s uncertain economy. “Stock markets go up and down, and an inheritance may change.” Lastly, advisors can ensure all family members stay up to speed along the way, Pultman says. “You need to make sure everyone involved knows your financial plans so there are no conflicts.”

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