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Managing Wealth

The reasons for wealth transition failures are generally personal, rather than technical, resulting from a breakdown of communication within the family, inadequate preparation of heirs, or lack of a shared family vision.

By Pat Armstrong and Nancy Amick, Abbot Downing

Wealth adds a layer of complexity to the family, with the potential to influence family members at both the individual and system level in both positive and negative ways. Recognizing this is as important as managing the financial assets.

Recent research found that 80 percent of parents don’t believe their heirs will be prepared to inherit their wealth. The sooner you prepare and educate your heirs, the more at ease you will be when transferring wealth.

Three tips can help families learn how to share their unique history, characteristics, and aspirations with younger generations. This approach includes starting points for discussion to help ensure a family’s wealth serves the family in positive ways and some helpful advice on when and how to talk to children about family wealth.

  1. It is as important to manage the impact of wealth as the wealth itself. Be intentional and start planning early. Leverage everyday events that can be used at teachable moments with your children, grandchildren and heirs. It’s also important to have an education plan in place, and to make information accessible and fun for all generations. Share financial architecture first, such as the creation of various trusts or family limited partnerships; then share financial information, incrementally, keeping in mind developmental stages, maturity and distribution milestones such as the age at which there will be access to or distributions from a trust.
  1. Unique wealth has an impact on individuals, families, future generations, and communities. Explore values at the individual level, and ask each family member to define both current and aspirational values. After each individual has identified and shared his/her personal values, a family can work collectively to further define a core set of shared values. These values can then be put in place to determine what non-profits to support or where money from a Foundation or Endowment established by the family can be directed. We encourage families to have Values and Vision statements to ensure everyone agrees on the focus for the future.

Sample Values Statement: “We organize our plans and actions around the shared value of growth, creating opportunities that enable family members and the communities we care about to prosper and thrive over time. Integrity and the pursuit of excellence serve as guides in our decision-making. We model the importance of learning as a lifelong objective and support one another in courageously seeking out both the knowledge and the experience needed to live life meaningfully and contribute to the good of society.”

Sample Vision Statement: “We are committed to family bonding, community outreach, and fun. We grow the family assets and provide for the family’s education, growth and security.”

  1. A focus on planning for how wealth can serve your truest aspirations is one way to harness wealth’s potential for positive impact. It’s important to understand where a family’s wealth came from to fully plan for the future. Abbot Downing’s family historians research the foundation of the family going back multiple generations and educate all generations of the family on how their enterprise was started or what family members did to get to where they are today. This helps to discover values that have endured across generations and thereby creates a foundation for conversations with future heirs.

“Most clients define a successful wealth transition as wealth remaining under control of the beneficiaries,” said Nancy Amick. “With 60 percent of wealth transitions failing due to lack of communication and trust within a family, it’s important to create communication opportunities such as family meetings to discuss transition plans and processes.”

Abbot Dowing provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries.

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