Managing the discussions, expectations, and priorities concerning the transfer of wealth are important. CNN.com’s recent article, “How to plan for wealth that lasts for generations,” reminds us that a financial planner's focus is primarily on preparing the assets for the family. However, it’s also important to prepare the family for the assets.
Investments and trusts frequently don’t last to the third generation, and in many instances, the main reason is a breakdown in trust and communication. Sometimes, it's due to a lack of preparedness in the younger generation, and the rest of the time is because the family's values and mission are unclear. This failure is rarely because of errors by the family's financial advisers.
Discussing wealth with heirs can help mitigate pitfalls and prepare them to preserve and grow their inheritance for future generations. Parents may be worried that wealth will disincentivize adult children from their own pursuits and that siblings will fight over money or start to distrust each other.
A solution is to have family meetings to talk about the structure of the estate with everyone over the age of 16, including spouses. This will avoid misunderstandings or suspicions about expectations. It’s not necessary to set out specific amounts. It is important, however, to state the overall strategy you want to have implemented.
In addition to getting everyone on the same page, it’s an opportunity to pass on lessons you've learned in developing long-term investment strategies. It's also important to discuss your priorities for the wealth, like paying for education, making investments, or funding family vacations. Don’t leave out philanthropy.
Making certain that heirs are prepared with financial know-how and life savvy skills is crucial to a successful transfer. You should tell them when they are well-established and emotionally ready. However, financial responsibility should be taught when they’re young.
It's critical to be clear about values that form your family legacy.
Have regular family meetings to update changes to the estate, family business and access to assets. Let family members also talk about the charities they like and to present business ideas.
It is vital to discuss the degree to which the older generation will help the younger generation, while they are still around.
Reference: CNN.com (September 10, 2018) “How to plan for wealth that lasts for generations”