70% of wealth is lost during the transfer from the 1st to the 2nd generation. 90% is lost between the 2nd and 3rd generation. My father recently passed away, and from that experience came one question. Upon your passing, does your money bring your family closer together or drive them apart?
I was speaking with an attorney recently, and I asked what’s one thing that is commonly coming up that people don’t think about. His words were that the children are fighting over the estate even if there are a will and trust in place.
I was speaking with an attorney recently, and I asked what’s one thing that is commonly coming up that people don’t think about. His words were that the children are fighting over the estate even if there are a will and trust in place.
Most of us hope that the work we’ve put in to save funds will be used to bless our families and communities, but oftentimes the balance sheet isn’t what drives the conversation. It’s the communication and the feeling of what is deserved, or of closeness to a family member. How does Generation 1 take inventory and communicate care, principles, reasons, and values prior to the transfers of wealth?
The Williams Group studied over 3,000 families and found that 60% of failed wealth transfers stem from a breakdown in trust and communication, not taxes or investments. The 2nd reason is hiers who are inadequately prepared for financial and administrative responsibilities. If you are like me, you grew up in a household where financials weren’t spoken about and for good reason. Often, when dollars and cents come up, they can cause friction in families or relationships, so we leave them unaddressed, but in the book Family Wealth, it speaks about how financial wealth is only one source of capital to transfer: Human Capital, Intellectual Capital, Social Capital, Spiritual/Legacy Capital, and Financial Capital. Financial capital is used to support the first 4.
The solution begins by recognizing that wealth transfer isn't primarily about money. It's about preparing people. For most parents who transfer wealth, we are more concerned about the type of person our children have become. For most of those inheriting the wealth, it’s more about the relationship and whether they're prepared to handle the transfers. One practical place to begin is an annual family meeting not to discuss inheritances, but to preserve the family's stories, values, and purpose before discussing dollars. We like to start by meeting with family members individually, but gradually move on to crafting a family mission, family vision, family values, and stewardship philosophy.
The Williams Group studied over 3,000 families and found that 60% of failed wealth transfers stem from a breakdown in trust and communication, not taxes or investments. The 2nd reason is hiers who are inadequately prepared for financial and administrative responsibilities. If you are like me, you grew up in a household where financials weren’t spoken about and for good reason. Often, when dollars and cents come up, they can cause friction in families or relationships, so we leave them unaddressed, but in the book Family Wealth, it speaks about how financial wealth is only one source of capital to transfer: Human Capital, Intellectual Capital, Social Capital, Spiritual/Legacy Capital, and Financial Capital. Financial capital is used to support the first 4.
The solution begins by recognizing that wealth transfer isn't primarily about money. It's about preparing people. For most parents who transfer wealth, we are more concerned about the type of person our children have become. For most of those inheriting the wealth, it’s more about the relationship and whether they're prepared to handle the transfers. One practical place to begin is an annual family meeting not to discuss inheritances, but to preserve the family's stories, values, and purpose before discussing dollars. We like to start by meeting with family members individually, but gradually move on to crafting a family mission, family vision, family values, and stewardship philosophy.
Wealth isn't just measured by the dollars that survive the next generation. It's measured by relationships, values, and purpose that survive with them. Before asking what you'll leave behind, ask who you're leaving it to and whether you've prepared them for the responsibility that comes with it.
As seen on LinkedIn
As seen on LinkedIn
