Avoid the Pitfalls of Multi-Generational Wealth Transfer

Passing on wealth to the next generation—also called wealth transfer—is a challenge faced by many families.

70% of Multi-Generational Wealth Transfers Fail

According to research, 70% of intergenerational wealth transfers fail, according to a study conducted by Roy Williams and his partner Vic Preisser of The Williams Group.

These experts studied substantial wealth transfer by 3,250 families over a period of 20 years. Their research revealed that wealth causes friction and dispute among family members.

Greatest Wealth Transfer in History

At the same time, the greatest wealth transfer in history has already started.

Upon the deaths of the Silent Generation (born between 1928 to 1945) and the Baby Boomers (born between 1946 to 1964), an estimated $30 to $68 trillion will be transferred to their adult children.

Why 1/3 of Families Succeed

Families need financial advice, as well as legal and tax preparation. But beyond this, the 30% of families who succeeded also focused on preparing both children and grandchildren for their futures.

According to the research, it’s important to identify a family mission and develop a strategy to achieve it. Families shared with heirs what the mission was and how it applied to the family wealth.

Heirs were also given the opportunity to practice their roles for the future—in philanthropy, the family business and other ventures—prior to taking on full responsibility after the passing of the head of the family.

Family Wealth Planning Challenges

It appears that many of the failing families completed the official aspects of the transfer, but failed in communication and preparation of their heirs.

A survey of high-net-worth individuals ($3 million+ in investable assets) by U.S. Trust found that 64% admit they have disclosed little to nothing about their wealth to their children.

Fears of Wealthy Family Patriarchs and Matriarchs

• 78% feel the next generation is not financially responsible enough to handle inheritance
• Uncomfortable talking about money
• Worry their children will become lazy and entitled
• Concerned the information will leak out

Tackling the Tough Conversations

Of the 70% of the wealth transfers that fail, the root cause of failure is a lack of post-transition planning or preparation. No one was preparing their heirs for the multiple kinds of responsibilities they would face when taking over the reins.

Building trust, open communication and teaching values in families enable successful wealth transfer and preservation for future generations: grand-children, great-grandchildren and so on.

In addition, philanthropic activities provide teaching for heirs, enabling them to have opportunities and responsibilities, even at young ages. When children are taught about the greater purpose and mission of their family wealth, they can become better stewards of the future.

Take the opportunity to strengthen your family by starting a conversation about what your family will do with its legacy and how it will happen.

If you have communication challenges, consider professional guidance. Our team can help set up family multi-generational trusts, as well as put together a roadmap to prepare your family. You can help your heirs grow as a member of the family and prepare to shepherd the family legacy.