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By Malissa Conlin*
Estate planning is an essential part of securing your family’s financial future. While much focus is placed primarily on drafting wills and optimizing tax efficiency, one critical aspect is often overlooked: preparing your children for the responsibility of managing their inheritance when the time comes. South Africa is diverse in its dynamics that are influential to wealth transfer, this includes cultural, economic, and legal dynamics and by teaching your children to develop a responsible attitude towards inheritance is a crucial aspect in your financial and estate planning.
It is important to prepare your children for the responsibility of receiving a significant inheritance which can be overwhelming, and without proper guidance, it can lead to poor financial decisions, family conflicts, or even the rapid depletion of wealth. Preparing your children will not only empower them to honour your legacy and use the resource you have furnished them with wisely to build their future.
- Start the conversation early
Age-appropriate conversations about finances and inheritance can foster a sense of responsibility. For example, with a younger child one could consider introducing basic financial concepts, such as budgeting and understanding the value of money. Whereas for older children or adult children, you could include them in discussions around your estate plan which will ensure that they understand the reasoning behind the decisions you are making.
Transparency about your estate plan will help your children understand your intentions and prepare them for their future roles: –
- Discuss the structure of your estate, such as wills, trusts, and other arrangements.
- Clarify any specific expectations or conditions tied to the inheritance.
- Address potential conflicts to minimize misunderstandings.
- Teach financial literacy
Education is key to preparing your children for financial independence and managing money. Financial literacy is a skill that can be built over time and will empower them to make informed decisions when they inherit.
- Budgeting: Encourage them to create and manage personal budgets.
- Saving: Instil the principal that saving is the cornerstone of financial well-being.
- Investing: Introduce them to the basics of investment vehicles like shares, property, and retirement funds.
- Debt Management: Stress the importance of avoiding unnecessary debt and managing credit responsibly.
- Education: Consider enrolling them in financial literacy courses or workshops.
- Introduce you children to your financial advisor and estate planners
Introduce your children to your financial advisor and estate planner while you are still alive. These professionals can provide guidance and ensure that your children are well-informed about the legal and financial implications of their inheritance. They will also be able to help your children navigate any complex financial decisions they may need to make in the future.
In South Africa, specific laws such as the Administration of Estates Act and the Income Tax Act may impact how assets are transferred. Educating your children about these laws and ensuring they know where to seek advice can prevent costly mistakes.
- Promote values-based wealth
Share stories about how your wealth was created and the sacrifices you had to make in order to build it. It is important that you children understand that an inheritance is more than money but rather that it is a reflection of a family’s values, culture, and history. This should encourage your children to use the inheritance in ways that align with your fundamental values, where it be through entrepreneurship, investments, or giving back to the community.
- Role-playing scenarios
By putting real-life financial scenarios in play, this can prepare your children for decision-making when the time comes. Scenarios that you can play out with your children, is asking them some of the following questions: –
- What would they do if they suddenly received a lump sum?
- How would they prioritize spending, saving, and investing?
- How would they handle potential family disputes over the inheritance?
- Emotional preparation is key
Inheriting wealth often comes with emotional challenges. Parents need to equip their children with tools such as fostering resilience and offering emotional support in order to assist them in handling these transitions. This includes preparing them to handle potential changes in family dynamics or relationships that may influenced by money.
- Update the estate plan regularly
Circumstantial change is inevitable, and so does your children’s levels of maturity and financial understanding. By prioritising, regularly reviewing and updating your estate plan will ensure that it remains relevant and by including and involving your children in these updates to your estate plan will lead in furthering their understanding and readiness.
Parents need to prepare children for the legacy left behind and the inheritance they are set to receive, all of this is achieved by fostering financial literacy, engaging in open conversations, and instilling a sense of responsibility, giving your children the head start they need in making sure that they are equipped with the right tools to manage their inheritance wisely and sustain your family’s legacy for generations to come.
* Malissa Conlin, FPSA®, is a Director, General Manager, a fiduciary services specialist, and manages legal and compliance at Brenthurst Wealth.
MARIA is a CERTIFIED FINANCIAL PLANNER®️ professional, a member of the Financial Planning Institute of SA and is fully qualified to give advice on all investment matters.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
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