December 10, 2013
In their 2003 book, Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, authors Roy Williams and Vic Preisser document a 20-year study of 3,250 high-net-worth families who went through the estate planning and wealth transfer process. Their findings: Seventy percent of wealth transitions fail — i.e. families lose control of their assets — by the second generation, and 90 percent by the end of the third generation. The principal reason, Williams and Preisser argue, is families’ failure to transfer their values along with their wealth.
“In some wealthy families, the first generation might make the money, the second might spend it and the third might lose it,” says Mary Martuscelli, West Region President for The Private Client Reserve. “Making sure the family money is tied to a sense of purpose may be key to preserving it.”
Whether your children and grandchildren are 5 or 25 years old, passing along values also may help ensure they become active, contributing members of society as they grow up. “‘If I give my wealth to my children, will it spoil them? How can I do it in a way that doesn’t disincentivize them from their personal development and self-esteem?’ These are the kinds of questions families wrestle with,”says Paul Nourigat, Senior Wealth Strategist at The Private Client Reserve.
“Many people want their children and grandchildren to go far and be constructive, productive citizens who can survive and thrive in an increasingly complex and competitive global economy. That means making sure they’ve got the tools and values to succeed.”
Here are some ideas that may bequeath the financial skills and sentiments your heirs need to potentially sustain both your assets and your legacy.