Preserving Wealth and Values: Strategies for Multi-Generational Success

Many people spend their lives working hard to accumulate wealth to cover their retirement. For those who’s wealth exceeds their lifetime expense needs there is a portion that can be shared with their families before or after their passing. Prudent planning for this wealth transfer should go beyond the legal language of trusts and wills to encompass deeply held values.

This begs the question, “How can one ensure that what they leave behind will impart a lasting impression on future generations?” As with most things in life, there are no guarantees, especially over a multi-generational timeframe. That being said, there are strategies and actions you can implement today to create an enduring family legacy.

Communication and education are both key. Engage younger generations in the conversation of how to manage and protect your family’s wealth. Help them understand that money is a tool. Like any tool, you must respect it, care for it, and use it properly if you want that tool to work when needed most. The same applies if you wish to pass the tool down to future generations. It is extremely important to educate younger generations on proper money management to help solidify and promote the financial goals you wish to see realized for your family.

Preparing for a Family Conversation Around Wealth

Where does one start when aiming for such a lofty goal? In many cases, it has taken the work of a lifetime (or several lifetimes) to amass a family’s wealth. Protecting and shepherding it for the next generation can feel like a full-time occupation. How does one teach successive generations to be good stewards of family wealth without destroying the motivation for future generations to succeed on their own merits? How can the value of hard work and the rewards of self-made success be instilled in someone who constantly has a monetary safety net beneath them?

Before you begin the conversation, it may be helpful to clarify your own goals. Keep in mind there are no right answers, and the purpose of the following exercise is to gain a deeper understanding of your own desires and feelings surrounding wealth.

• What is it you want to communicate to your children and grandchildren?
• What values are most important to you?
• What values do you believe are most important to them?
• What do you desire most from your financial legacy?

The term “wealth” means different things to each of us. Before attempting to teach younger members of your family about wealth, it is prudent to explore what the term means to you personally.

• What does it mean in the context of family?
• Does being wealthy mean having enough to alleviate worries about how to pay for life’s necessities?
• Does it mean having enough that costs are of no concern?
• Does it mean being able to pursue altruistic endeavors while maintaining a comfortable lifestyle?

Next, begin thinking about what you would like your wealth to do for you, your children and future generations. Start by defining your goals for your wealth over your lifetime.

• How much will you need to supplement your income in retirement?
• Can you meet those needs with minimal principal invasion?
• Are there charities you wish to support?
• Will you need to modify your spending habits to achieve the goals that are most important to you?

Crafting the Family Wealth Vision

Once you have a clear definition of wealth and an understanding of your own goals in relation to it, you can initiate discussions on these topics with other family members. Then you can use those discussions to further develop and refine a shared family vision of wealth. This vision should be crafted with both present and future generations in mind. A clear and well-articulated vision serves as the source code for the direction and nature of inter-family education. When you feel the family vision is nearing full development, write it down. The process of crafting a concise mission statement for your family’s wealth allows for further refinement of your goals. Revisit your family’s vision and mission statement annually, if not more frequently. Check to ensure that it accurately reflects the family’s wishes and make any changes necessary. Remember this is not meant to be a list of rules set in stone, but rather an expression of the values and desires of the collective generations of your family.

Express your wishes in terms of a desire for future actions by subsequent generations, rather than a mandate for those actions. For example, you own a vacation home that you would like to see kept in the family and not sold. Let your children or grandchildren know that you hope to see the home passed to future generations so they can enjoy it as previous generations have. Show them how it can help future generations connect with the family history. While there are no guarantees they will do as you ask, chances are much higher if they fully understand your reasoning. On the other hand, mandates and absolutes handed down to future generations without ties to the family’s shared vision can often breed arguments and resentment.

Fostering Effective Communication

For communication between family members to be truly effective, conversations should be “adult-to-adult” regardless of the participant’s age or stature within the family. Children and grandchildren must feel that they are being heard and taken seriously, as they will one day be the ones leading these discussions with their own children and grandchildren. Give all family members permission to assert themselves and make their feelings known. Try to do so in a way that makes all family members feel they are safe from judgment and ridicule. The last thing you want is family members parroting ideas that do not reflect their true feelings for fear of losing standing with their parents or peers within the family. Family members must feel that their contributions are valuable and influence the tone and direction of the family vision. Feeling vested in the overall plan can greatly increase their sense of ownership, leading to increased odds of your shared vision being carried out by future generations long after your passing.

Closing Thoughts

While initiating discussions on wealth, inheritance and philanthropy can appear to be insurmountable tasks, it does not take much to get the conversations started. Begin by thinking about what wealth means to you personally in its various forms. Then consider when and how much of your wealth you want to pass to future generations. Consider crafting a shared family vision or mission statement to serve as a roadmap to guide your family’s wealth across multiple generations. After creating a vision or mission statement, you can use the same questions that you asked yourself regarding wealth to begin conversations with your heirs.

Fostering effective and open communication between generations can greatly increase the odds of your family’s wealth weathering the shifting sands of time. Communication also opens the door to motivating and inspiring the next generation to become good stewards of the wealth they will inherit. This process can be a vehicle to draw families closer and provides an avenue to pass down the hopes, goals, and achievements of past generations. Within those shared values lies the true wealth of the family. Protecting that wealth for future generations is an ongoing process, and one that begins with open communication.

At times, having an outside voice or moderator involved can help move conversations between generations forward. If that is the case for you, or if you would like to discuss this topic further please reach out to your Summitry financial advisor.