Family Financial Planning: Values-Based Financial Plan for Children and Heirs

The primary financial goal has always been to provide for the next generation. We work hard to ensure our children have opportunities we did not have debt-free education, a down payment on a first home, or a safety net for life’s uncertainties.

However, transferring assets without transferring the values required to manage them can create more problems than it solves. A sudden windfall for an unprepared heir is rarely a blessing; often, it is a burden that can erode both the wealth and the recipient's ambition.

Values-based financial planning shifts the focus from "How much money can I leave?" to "What kind of steward will I leave behind?"

With that in mind, let’s look at how to structure a plan that transfers not just your net worth, but your financial wisdom.

What Is Values-Based Financial Planning?

Values-based financial planning is a holistic approach that aligns your wealth transfer strategy with your family’s core beliefs. Instead of simply dividing assets equally, it structures inheritances to incentivize productive behaviors, support education, and encourage philanthropy.  

This approach asks: Does this financial decision support the character I want to build in my children?

The Mechanics of Giving (Accounts matter)

The first step in values-based planning is choosing the right "container" for your gifts. The account type you choose dictates the level of control you retain.

1. 529 College Savings Plans

For families in our state, the 529 plan is often the most efficient tool for educational funding.

• The Value: It signals that education is a family priority.

• The Benefit: In our jurisdiction, contributions to the state-sponsored 529 plan are generally 100% tax-deductible on your state income tax return. Additionally, funds grow tax-free when used for qualified education expenses.  

• The Guardrail: If the child decides not to attend college, the money isn't automatically theirs to spend on a sports car; the account owner retains control.

2. UTMAs (The "Age 21" Trap)

Uniform Transfers to Minors Act (UTMA) accounts are simple to set up, but they come with a rigid deadline.

• The Risk: In our state, UTMA assets typically become the irrevocable property of the child at age 21.

• The Tradeoff: Ask yourself: Is my child prepared to receive a lump sum of $50,000 or $100,000 at age 21 with zero restrictions? For many, the answer is no.

3. Trust Planning

For larger sums, a trust provides the flexibility to match distributions with maturity.  

• The Strategy: Instead of a lump sum, a trust can distribute assets in stages (e.g., 1/3 at age 25, 1/3 at 30, 1/3 at 35) or incentivize milestones (e.g., matching a down payment on a home).  

Teaching Financial Literacy

A values-based plan requires active education. We often see families where the parents are experts in saving, but the children are experts only in spending.

Strategies for "Wealth Training"

• The "Match" Program: Tell your teen that for every dollar they earn from a summer job, you will match it into a Roth IRA. This teaches the value of labor and the power of compound interest simultaneously.

• The Philanthropic Vote: Open a Donor-Advised Fund (DAF) and hold an annual family meeting where the children research and present a charity they want to support. This instills a sense of community responsibility.  

Common Questions About Family Wealth Transfer

To help you navigate these complexities, here are answers to the most frequent questions we receive.

How much can I gift to my children without paying taxes?

For 2026, the annual gift tax exclusion is $19,000 per person ($38,000 for a married couple). You can give this amount to as many individuals as you like each year without filing a gift tax return or using up any of your lifetime exemption.  

Will my heirs owe taxes on their inheritance?

Generally, no. Our state does not impose a state-level estate tax or inheritance tax. At the federal level, assets receive a "step-up in basis," meaning your heirs can sell inherited stocks or real estate immediately without owing capital gains tax on the growth that occurred during your lifetime.

What happens if I don't have a will?

If you die "intestate" (without a will), the state’s laws determine who gets your assets. This often leads to rigid distributions such as assets going to a spouse and children in fixed percentages that may not align with your wishes or your family’s needs.

How to Approach the Decision

Creating a values-based plan is less about spreadsheets and more about communication. A prudent process includes:  

1. Define Your "Family Why": Write down the three most important values you want your wealth to support (e.g., Education, Entrepreneurship, Charity).

2. Audit Your Beneficiaries: Ensure your current accounts (UTMAs, Insurance) don't accidentally give large sums to minors sooner than you intend.

3. Convene a Family Meeting: Start talking about money before the crisis. You don't need to reveal your net worth, but you should discuss your philosophy on debt, saving, and giving.

4. Consult a Fiduciary: Work with a financial planner who can help you structure trusts and accounts that act as guardrails for your legacy.

Important Disclosures

This material is general in nature and for informational purposes only. It does not take into account your specific objectives, financial situation, or needs and does not constitute personalized investment, tax, or legal advice. Tax laws, including annual gift exclusions and state-specific deductions for 529 plans, are subject to change. Trust and estate laws vary by jurisdiction. Before making any decision about your estate or gifting strategy, you should carefully review your options and consult a qualified attorney and tax professional.