Passing on Wealth to the Next Generation

 You may have heard the saying, “Shirtsleeves to shirtsleeves in three generations.” In a family, it refers to the phenomenon of a generation building wealth, passing it to a second generation, and by the time the third generation rolls around, the wealth has disappeared.  Unfortunately, many research studies indicate it is true. In fact, 70%* of wealth transitions fail. Whether you are passing on a family business or family investment assets, most parents have the same desires.  They would like the money to enrich the lives of their children and grandchildren and to be neither frivolously spent nor a burden.  Parents would like their children to know the family values and participate in the formation of a value orientation for multiple generations.

There is the catch. Successful transitions do not just happen when the elders die and assets are distributed.

Successful transitions begin long before elders are gone. One way to begin is the family meeting where adult children are involved in knowing about and understanding the family wealth situation.  Passing on family values is an everyday experience.  Family meetings give members the opportunity to express their views, take responsibility and acknowledge where they may need additional help in accepting responsibilities. Family meetings also give members the opportunity to understand how family resources can benefit several generations.  These family meetings should involve members in the decision making process.

There are many ways family meetings can be conducted but they all center on the same objectives of trust, communication and understanding.  Parents teach their children to ride bicycles, play baseball and drive cars.  Family meetings help the next generations to use one of their most valuable resources, family wealth, to attain personal satisfaction and growth in an environment of family values.

Coming up in my next blog, more on avoiding the shirtsleeves to shirtsleeves trap. I’ll discuss how to use a family meeting to begin transferring assets.

**Sources:  1983 MIT Study reported in the Economists;  Roy Williams and Vic Preisser from the Williams Group  research study.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  The services and  opinions of Roy Williams and Vic Preisser are independent of Raymond James. You should discuss any legal matters with the appropriate professional.