Managing your wealth throughout your lifetime comes in two phases:
- Financial planning to increase and manage your current wealth,
- and estate planning to protect the inheritance that will be passed along to future generations.
Unfortunately, even with years of planning, many families see losses exceeding 90% when it comes to their inheritances. The first generation works hard to create a fortune; the second generation enjoys the spoils of that fortune; and the third generation, with no proper role model to follow, uses what little remains of that inheritance. The fourth generation therefore has to start all over again. Who is to blame for such a dramatic loss of wealth, and why do so many families experience it? Many would say poor investment strategy, economic downturns or bad markets– however they are not the culprits.
Those who thwart such a significant loss to their family fortune do so by adding a third component to their wealth strategies; intellectual inheritance. A study conducted on 3,250 families who lost their wealth concluded that 25% of their heirs were unprepared, and 60% blamed a lack of communication and trust within families.
A family that unites over their legacy and accomplishments
When heirs are knowledgeable of their families’ stories, traditions and values, they can then better relate to the reason behind the sums of money they are set to receive, and consequently manage it better. Wise financial, tax and estate plans alone do not accredit statuses of wealth- it is crucial for older generations to educate younger ones about the inheritance they are projected to acquire. When a family unites around their legacy and accomplishments as opposed to their net worth, it has a greater chance of preserving its family fortune.
Solidifying Family Relationships: How?
Family meetings should be held at least once a year, and they should include every single member, from grandparents to grandchildren. The goal of these meetings should be to promote family harmony, and to provide moral support needed to live a meaningful and fulfilled life. Open communication should be fostered, new experiences created and growth encouraged. When regular meetings are part of the family plan, generations can intersect to share ideas and make plans for the future, financial included. Money should be the means, not the end, of a family’s collaboration.