Stories of intergenerational wealth transfers fraught with the disasters of family infighting and squandering of family fortunes tend to dominate and darkly shadow those where families were successful, albeit quietly, in transitioning wealth from one generation to the next.
Those families who enjoyed success understood proactive and intentional planning, which was mindful in preparing the family and the assets for transition, was critical to that success. In addition, attention to the wants and needs of both the owning generation and the successor generation(s) highlighted critical factors embodied in winning outcomes.
Understanding family culture and the value, vision, and mission of the family wealth
It’s not all about the cash, but rather how the family came to be where they are and the vision for wealth created. The family history shared through storytelling chronicles the family’s experiences creating and managing wealth. These stories bring to life the hard work and sacrifice expended, not only of those who engaged in the work but also recognition that the entire family participated in that work and sacrifice. This storytelling has added value as it allows all family members to share their perspectives on what it was like living during that time and through the same experience. Understanding differing views of the experience may shed more light on family members’ attitudes toward money and wealth. Discussing wealth, and the attitudes towards it, opens the forum for further discussions on what wealth means, its vision and mission — for both the family and the communities important to them. Conversations about the family’s goals, what they seek to achieve, and what they need to do to succeed are also important. This understanding of where the family came from (its history), where it is now (its culture), and what it aspires to (its vision, such as legacy and philanthropy) may then lead to the development of wealth transition plans that meet the needs and reflect the shared values of all who are impacted by those plans. ‘People support what they help to create’— successful families realize that buy-in of transition plans by those who live the results is necessary for successful outcomes.
Generational differences are opportunities and challenges
How often have we heard or said ourselves, “They just don’t get it,” “How can they like that music,” or “They don’t work like I do.” It’s no surprise that generations differ since generational perspectives are formed over time. How we see the world and what we value is collectively impacted by life experiences — the era in which we grew up, prevailing attitudes, world events, technology and other influences. Recognizing these differences and talking about the opportunities and challenges they might invite allows each generation to understand the other better and the unique value each brings to the family. Successful families realize planning needs to work across generations and not strictly for just one.
Preparing the next generation for success
The capabilities required to receive and manage wealth are acquired over time through education, managing and protecting the family’s wealth, and through real-life experiences — both successes and failures — managing money and other forms of wealth. Therefore, understanding what is to be inherited (components of wealth) and how to manage that wealth is essential.
Skill development is a form of self-defence. Educating the next generation, arming them with the competencies necessary to manage wealth, such as:
- financial literacy and strategic intelligence,
- communication,
- decision-making, and
- forging meaningful relationships will build confidence and independence to manage and maintain their own life, the wealth they may create, and that they may inherit.
Exposing and engaging the next generation in the activities required to manage the family’s wealth can create a connection to that wealth, promoting a sense of pride in ownership. For example, scrubbing the family boat, sweeping the floor of the family’s store or helping repair a broken door or window of the family’s rental properties builds practical life skills and interaction with assets that require care and attention to continue to support the family.
Gaining relevant experience in the activities required to manage wealth, such as following a budget (allowance), planning for saving and spending (personal and charitable), working with an advisor, and joining in conversations about the family’s wealth promotes learning moments in times of success and failure, both of which are important.
Sharing details of what will be transitioned and how it will be transitioned and subsequently held allows the next generation to understand the components of wealth and the intentions of transition plans. With this understanding comes an appreciation for the required skills, their roles, and the responsibilities of wealth.
Successful families realize that preparing, educating and mentoring the next generation to be successful recipients and owners of wealth is critical for successful transitions and ongoing continuity of wealth.
Forums for communication
The value and importance of communication within the family and with external stakeholders and advisors shouldn’t be overestimated when building and maintaining a thriving intergenerational legacy. Communication not only informs and educates, but it also serves to build trust within a family. Trust breeds goodwill which may be accessed and relied upon when difficulties arise.
Communication takes all forms in families; a chat in the car, over a Sunday dinner or other family gathering. Some families have more established practices, such as a family meeting, particularly when discussing matters of high importance to the family. These meetings belong to the family and take whatever form works best for them. Some formality lends to success, such as scheduled meetings, predetermined agendas, assignment of roles (note taker, timekeeper, meeting organizer, etc.) and a fun factor. An important issue to consider: who will be invited to the meeting, only the nuclear family or will an invitation be extended to in-laws?
Many families find great benefits in family meetings as they support:
- transparency, which is essential to avoid assumptions
- a shared understanding
- articulating family goals and values, which may create unity of purpose and vision
- curiosity and inspired leadership, and
- strengthening relationships and building connection
Family harmony, perceived fairness, and no messes left behind are often the primary goals of a successful wealth transition and continuity plan. Preparing the next generation, sharing details and intentions, and ongoing open and frequent communication have served successful families well.
source https://rosenbergdri.ca/generational-wealth-planning-engaging-and-preparing-the-next-generation/
Dri Financial Group 