Creating Family Legacies

There are many challenges to Family Wealth, and while family harmony really isn’t defined by “wealth”, the more financial assets a family has, the more weight as to the question of what the purpose of the wealth is to the family. Interestingly, the process of creating a family legacy, be it about caring fro Mom and Dad as they get older, or how and when family members share in the fruits of older generations’ wealth creation, that process is similar and clear.

Research conducted by Williams and Pressier indicates more than 60% of the families studied dissipated their wealth within the 2nd generation. Within the 3rd generation more than 80% of wealth in families were dissipated. That means only some 20 – 30% of families seem to hold onto their wealth.

What did they do differently? The data was clear.

  1. There was effective lines of communication as to expectations, responsibilities and accountabilities among family members, and
  2. There was a clearly defined sense of mission, or what the family “stood for” that was agreed upon by the family members, and
  3. Either implicit or contractual, there were guidelines or rules that everyone bought into and worked within, eliminating bickering (or reduced bickering!) and allowed for simple and clear entity planning to facilitate the wishes of the family in a tax mitigating and asset protecting fashion.

What does this mean to you and your family?

Many of us go out and create wills and trusts and think that will suffice. It may. But the evidence indicates it does not. These pieces of paper are merely directives guiding family resources in a manner that may or may not make sense, supported by, and executed properly by family members. The point is develop a desired outcome, then have documents reflect that picture. Have the plan reflect the values, and not the valuables of the family.

All families have some level of stress within the family. Money does not change family dynamics. It amplifies it. Therefore, planning around what is important to you and your wealth, articulating that to family members with good lines of open communication is important. It is important to understand no 2 families are alike. What works for one is not a template for the next. It depends upon family make up, relationships to wealth, financial maturity to wealth, and, at the core, your family values which define how best to craft documents that will allow the family to thrive and flourish as a result of family wealth.

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