Wealth Transfer

Steps to Prepare Heirs for Successful Transfer of Family Wealth

 Roy Williams and Vic Preisser have been studying wealth transition for some time.  Their research of 3,500 families’s duplicated the 70% failure rate of wealth transfers from one generation to the next as cited from previous studies.  In their book, Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, the authors outline steps to achieve a successful transition. Whether you have a family business, millions to pass on, or more modest amounts, you will likely find some of the suggestions may meet your needs. The first step, Assessing a Wealth Transition Plan, the authors develop a wealth transition checklist which includes:  Heirs understanding their future roles, heirs reviewing the family estate plans and documents, and creating a family mission with incentives and opportunities for heirs.

And if you are interested in avoiding falling into the 70% trap, the research on wealth transition failures will be of interest. Three factors emerged as to why successful transitions failed.  The first is a breakdown of communication in the family—often coming from a lack of trust within the family.  The second is a lack of preparation of the heirs---particularly if one person was to be the dominant manager and was not ready to take on that role; and the third factor is a lack of clarity of roles of family members in the management of family assets.

Passing on wealth from one generation to the next doesn’t work on autopilot. If you don’t want to go from “shirtsleeves to shirtsleeves in three generations”, take the time to make sure your children and grandchildren are involved in the transfer of wealth from the beginning.

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.

How to Transfer Family Assets Through Successful Family Meetings

 Research has show that 70%* of wealth transfers fail from one generation to the next.  Family meetings are one vehicle that can be used to help all members of the family gain a greater understanding of family assets and values.  But despite the usefulness, family meetings are seldom held.  Parents may be reluctant to share knowledge of family resources because they are concerned about stifling individual initiative and because their children may have different economic situations and temperaments. There is also the divorce issue, which leaves some parents reluctant to have in-law children know of the wealth situation. Second and third generation children are often scattered through the country and beyond which make meetings difficult.  However, the consequences of not helping the next generation understand wealth management may cause family friction, jealousy, business failures and frivolous use of resources.

There are many ways to begin family meetings.  Designating specific times at holidays or vacations when the family is together is one possibility.  Technology is another.  The use of a family web site, blogs, and social media for the family can be an innovative mechanism to celebrate successes and discuss more serious issues.

Meetings do not have to start out will full blown disclosure. 

Some techniques you can use to assess family values & engage in learning experiences:

  • If the family is charitably inclined, have younger members choose a charity of choice, find out about its programs, fund raising activities, financials and success.  Designate a sum of money to go to one or more charities after the research project; reevaluate the following year.
  • Game playing.  What would you do with your life if you won the 5 million dollar lottery; what would you do if you knew you only had ten more years to live?
  • Pick  investment vehicles such as real estate, stocks and bonds to research
  • Discuss alternatives for educational funding
  • If you have a family business, discuss the process for getting family members involved. Discuss what educational needs are critical to success of them in the business.

Eventually, a meeting with the family advisors, financial planner, attorney and CPA should take place.  This will help the family know the advisors and gain greater understanding of the net worth of family, the tax situation, estate planning situation and an opportunity to discuss short and long range goals.

Successful family meetings are intended to engage family members, not be a set of rules handed from one generation to the next.  Healthy communication among family members builds trust; trust builds understanding and is more likely to achieve acceptance and enthusiasm in achieving individual and family goals.

Coming up in the third part of this blog series, a step-by-step resource for anyone hoping to keep the legacy they leave behind from evaporating.

*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.

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.

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