Generational Wealth Transfer: How to Prepare Your Heirs

Joseph Dionisio CFP®

Senior Financial Planner
First Republic Investment Management

February 17, 2016

Members of the same family can have dramatically varying views about wealth. Further, having a conversation about it with children at any age can be a difficult subject to address. Given that a large number of families never sit down to discuss the preservation of wealth, it might come as no surprise that according to a recent survey by the wealth consultancy The Williams Group, 60 percent of wealthy children spend their inheritance and by the third generation, while only 10 percent maintain it.

Families who have not previously dealt with education and communication around wealth might not realize one unintended consequence of keeping quiet about family wealth: an inability to pass along their values to the inheriting generation. Without formalizing the family’s philosophy on wealth, or creating a documented recognition of what a family’s mission is and why it matters, it’s tempting for heirs to spend through their inheritance, sometimes without even realizing that they’re doing so.

The good news is that this doesn’t have to be the case. Cracking the generational money code and responsibility of wealth comes down to the most basic of principles: communication and education. Incorporating the following in your wealth transfer plan will help put your heirs on a path to financial stability for generations to come.


"The better educated children are regarding their family’s financial position, gift giving philosophy, personal values and goals, the better prepared they’ll be to one day take the reins and carry on the family legacy."


Develop a Family Mission Statement

The most effectively run businesses manage according to an overarching mission plan, which feeds into the organization’s annual and long-term goals. Successful long-term planning should be no different for a family. The main difference is that family members often commonly come to the table with a non-business mindset and oftentimes need guidance in developing a core family mission statement.

The mission statement should encompass the viewpoints and desires of all family members, even children both young and old. To keep the younger generation invested, they’ll need to be part of the decision-making process. Contrarily, a hierarchal model can alienate, instead of unify, a family.

In fact, early financial education can help emotionally prepare children for the eventual transfer of wealth. The better educated they are regarding their family’s financial position, gift giving philosophy, personal values and goals, the better prepared they’ll be to one day take the reins and carry on the family legacy.

Set a Regularly-Recurring Family Retreat(s)

Formal or informal, a family financial planning retreat creates an intimate opportunity to review a family’s mission statement, discuss how the wealth was created and update the family tree, evaluate past goals and consider future plans. Unity isn’t the only goal of the gathering. It should be used as an opportunity to hone financial plans, discuss philanthropy and further the family's financial education. The retreat may include guest speakers on pertinent topics – handling an inheritance, responsibility of wealth, charitable giving for example. Breakout sessions can be helpful allowing instruction to be tailored toward age range or educational need. However it’s handled, getting together once or twice a year as a family to discuss future financial plans can help strengthen subsequent generations’ ability to extend the life of accumulated wealth.

Establish a Panel of Financial Mentors

Many high net worth families may not know how to approach the topic of wealth management or may not have the knowledge or skills need to handle the conversation on the eventual transfer of money to their children. It can help to develop a council of trusted money mentors who are available to your current and future heirs as difficult topics arise. Mentors can include a family member (an entrepreneurial uncle, for example), a trusted advisor, even friends. The goal is to surround your family with financially savvy people who can serve as stewards towards developing financial independence.

Financially successful families bring their children into the financial fold early, introducing concepts as they become appropriate for each age. The key is to remember that any age is appropriate to start the conversation. Early and continued financial education and family unity can help successors maintain familial prosperity for generations to follow.

The views of the author of this article do not necessarily represent the views of First Republic Investment Management.                                                                                                                                                                                                                
©First Republic Investment Management, 2016




The views of the author of this article do not necessarily represent the views of First Republic Investment Management.                                                                                                                                                                                                               

©First Republic Investment Management, 2016