Over the years, questions asked by concerned parents, worried about leaving a family legacy, usually fall into similar categories:
- How do we provide for our heirs, long term, in a way that will help, not harm them?
- Do we want to treat our heirs equally or fairly, when we die?
- How do we address the breakdown of trust within our family?
- How can we pass our values to our children and grandchildren, and what is our definition of wealth?
Over a 20 year-period, we interviewed 2,500 successful families who had transitioned wealth to their heirs. Overwhelmingly, they told us that their values were the most important gift they could pass on to loved ones. We learned that values determined actions taken, or not taken; actions determined impacts and results; and impacts and results determined a family’s future.
While money and "things" are transitory, the values your family holds are paramount. Consider the purpose (or mission) of your family wealth:
- Is that purpose based upon family values?
- Have all family members and their spouses, including grandchildren over 16, sat down and discussed and articulated the common values held as a family?
- Does your family have a written statement for the purpose (or mission) of its wealth based upon those values and agreed to by all family members?
All of this must be based upon trust, making trust and communication two of the most important factors when it comes to the transfer of wealth.
Our research showed that 60% of the breakdown in transferring wealth was due to issues with trust and communication; 25% was weighted to heirs being unprepared to be accountable and responsible for being good stewards, and 10% was due to no purpose (mission) for the family's wealth. Even the definition of wealth was unclear. Some believed it referred to cash, stock, bonds, real estate, and business interests. Very few added the importance of background, experience, education, and networking capacity of the heirs, their spouses, and grandchildren.
Our experience, aided by our research, indicates that without common values, a common mission, and authentic trust, few families stay together, long term.
Addressing trust and communication, preparing heirs, as well as developing a written family mission, requires a great deal of experience and understanding in order to address cordial hypocrisy and other breakdowns, which occur in many families.