The Difference Between Inheriting Money and Inheriting Wealth
Transferring wealth is the biggest risk or the greatest opportunity our nation will face for the foreseeable future. In many of the meetings I attend we often discuss how to stimulate new dollars and create new wealth. I believe that work is very important, especially when it creates pathways for people and communities that have historically been disenfranchised. However, I do not think we spend enough time discussing the potential consequences of losing the wealth that families have already created.
Through my reading of Family Wealth and information published through Visa, I came across the proverb “shirtsleeves to shirtsleeves in three generations.” The proverb describes a pattern in which one generation begins with hard work and blue-collar labor. That generation, or its children, works its way into suits, white coats, business ownership, or professional success, only for the third generation to return to shirtsleeves. In Family Wealth, the author explains that his interest in studying this topic was influenced by his mother’s experience. As an elementary school student, she arrived home one day and saw a “For Sale” sign in the yard. Her father had gone bankrupt, even though her grandfather had been a very successful investor and businessman who had left significant wealth to the family. Almost overnight, the family went from affluence to financial difficulty, and she watched her mother work until the age of 80 to help provide for the family.
I do not believe we should completely abandon creating new wealth. In fact, I don’t know which is more difficult: creating new wealth or maintaining existing wealth. New wealth creation is what makes America a unique place. A person can move here from anywhere and, within a lifetime, create wealth and watch their child achieve wealth, regardless of how or where they were born. Granted that path is more difficult for some more than other but there aren’t many countries were that options is available. The more people who can realize that “Dream” the better the nation is.
Ironically, one solution to preserving wealth lies in accomplishing the root definition of the word “wealth’ and “prosperity”. Wealth historically has been connected to the following "a state of happiness, health, and prosperity." Prosperity in latin means "success according to ones hopes”. Money is not identical to health, happiness or purpose but it can provide the security and choice that support them.
As families, we need to spend more time defining what does happiness, health and prosperity mean to us. Then we need to discuss how will we use money to support healthier and more fulfilled families.
Too often, we trade our happiness, health and hopes in a effort to accumulate money with the hopes it will produce the fruit of wealth. However, accumulating money without communicating its purpose can contribute to the the cycle of shirtsleeves to shirtsleeves. Spending more time defining and pursuing real wealth may create better outcomes for preserving financial wealth across generations. The success of families and in many ways, the future of our country may depend on it. Below,, there will be 3 actionable steps you can take with your family:
1.) Define what wealth means to your family. Schedule time personally to write down what you hope for your family. What do happiness, health, and prosperity look like? Then ask yourself how money can support those things rather than becoming the goal itself.
2.) Start a conversation. Share what you wrote with your spouse, children, parents, or someone you trust. Ask them what happiness, health, and prosperity mean to them. The goal is not necessarily agreement; it is understanding
3.) Begin putting together a plan for how financial assets will eventually transfer. That may include reviewing estate documents, beneficiary designations, financial accounts, family expectations, and the people who will help carry-out that plan.
If you need a place to start, consider speaking with a qualified financial, tax, or estate-planning professional who can help your family organize those conversations and develop a plan. We've placed our link to schedule time and our website below.
