“We’ve worked hard to build and protect our wealth, not just for us, but for our kids and grandkids. I just don’t want this money to ruin the family when I’m gone.”

Does this sound familiar? If you’re thinking about how to pass your wealth to future generations of family, this is one of the most frequent fears. The data backs up your concern, with an estimated 70% of families losing their wealth by the second generation and 90% losing it by generation three. With all the demands on your time, and maybe some family tension around money, it’s hard to know how to resolve the tension in a way that keeps the family in harmony.

What if you had a clear plan driven by a compelling vision for how you want wealth to impact your family? And what if you were able to use this plan to unify your family? Imagine the harmony you could bring to your wealth plan. We collaborated with Bhaj Townsend, founder of Focus & Sustain and a coach focused on helping families pass significant wealth with clarity, to help outline a plan to pass your wealth with your wisdom. According to Bhaj, passing your wealth with wisdom starts with vision and purpose.


Write your story, purpose, and vision

What impact do you want your wealth to have in the next 25 years? How about 50 years? It’s time to delve into the story, purpose, and vision for your wealth. If this hasn’t been clarified or communicated to the family, it can be a common source of tension. Capturing your wisdom with wealth involves these three components:

  • Your story. Reflect on your own life and what principles have guided you. What principles did you learn or absorb from your parents and grandparents? It is important to know what standards and motivations drive your family and contribute to its “brand.”
  • Your purpose. Based on the values you want to maintain, what impact do you want your wealth to make? Maybe it’s supporting charitable causes, creating an educational fund, or supporting family members who want to start their own business. Whatever your impact, it should be clear and compelling to you.
  • Your vision. Dedicate time to thinking about your future generations and how you’d like this money to benefit them. What are they doing with the family money? How are they talking about it and carrying the legacy forward? While most families lose their wealth by the third generation, this vision could help your family thrive.

Create an intentional space to write out your story, purpose, and vision. This takes time and focus, but if done well, it can serve as a guiding light for your family. When complete, it’s time to bring the family on board.


Enroll your family in your vision

If you’ve identified your most important family wealth values, start thinking about who in the family to start conversations with, where the conversations will take place. Will you bring the family to your favorite vacation home? Or perhaps you’ll have one on one discussions on a special hike? Maybe you’ll start the discussion around the dinner table during the next gathering. Consider the following:

  1. Choose an approach. Will you bring multiple generations of family together at once, talk with one person at a time, or some combination? This will depend on your family and your vision but be intentional with who you tell and how.
  2. Pick a place and a time. Don’t let this sit on the “to-do” list, make an action plan and get started! Decide how you’ll make this a life-giving experience for your family and put the date on the calendar.
  3. Prepare your story, purpose, and vision. Telling the right story can connect the family history with multiple generations and illuminate the spirit of the family in the process. This means more than explaining what you want done from a legal perspective. It’s about passing on your compelling vision for the future you could create together. If they see the potential impact and understand how important they are in bringing that vision to life, they’re more likely to develop the same passion you have. Communicating this effectively takes preparation.

Working to establish a purpose for the family money is essential to creating and sustaining harmony in the family as it is the thread that binds family members.


Involve a team of trusted advisors

Crafting your family wealth vision and communicating this to your family is no easy task, but building a team of trusted advisors can help immensely. This team varies by family and situation, but can include a few key players:

  • A coach like Bhaj at Focus & Sustain can help clarify and communicate your vision, even acting as a catalyst for family wealth meetings.
  • A wealth management team like ours at Alterra can help your family navigate money decisions, choose investment strategies, reduce loss to income and estate taxes, and clearly demonstrate the impact you can have.
  • An estate planning attorney can explain the rationale behind the trust and legal structures you’ve put in place, so your family doesn’t see these as restrictions, but tools to optimize your impact.

This team can help ensure that your family vision is coordinated with your investment, risk management, and estate documents so all members of your team are working together to support your vision and mission.  If you have this team in place already, make sure they know one another and consider introducing them to the family as you navigate this process.

If you don’t have a team like this in place, reach out and we’ll be glad to help make connections to resources for you to consider. Your situation may require additional specialized help if you’re transitioning a family business, setting up a family foundation, or other unique circumstances. Introduce your team of advisors to one another and, when possible, let them collaborate on your behalf. Then, introduce your team of advisors to your family. This builds familiarity and comfort with your plans and it helps them know who to contact should something happen to you.


Nurture your plan

Families tend to break down, usually within three generations. Yes, this means your grandchildren’s children won’t know who you are unless you intentionally put components in place to nurture your family’s heart in conjunction with a clear family vision. Think of a garden. If left untended, it deteriorates with weeds and brambles taking over. When planned, prepared, and nurtured it can serve as a centerpiece for not only your family, but also the community, for generations. Likewise, you must nurture the growth of your family wealth vision. Does this just come naturally for the lucky few? NO, it does not come naturally, But, yes, it can be done. Here are a few suggestions to consider:

  1. Host regular family meetings. In the work laid out above, you’ve built and communicated your family vision. You’ll need to regularly get together to renew the purpose, share stories, report on the family money, and mentor younger family members into the purpose and the values of the family. This meeting should have a regular agenda so attendees know what to expect and what they might need to prepare.
  2. Share responsibility. As the years go by, give responsibility to others in the family, focusing on those who will carry the most responsibility when you have passed on. But, where possible, find little ways for others to be actively involved.
  3. Separate family money from individual money. Clearly delineate between funds the family is managing together – the “family money” – from the wealth each family member has on their own. Each individual should have the confidence to make the best decisions for their own families without worrying about what is and isn’t theirs.
  4. Create a family action plan. Once the foundational work is complete, introduce activities that support the vision of the family money. These differ from family to family and often include charitable giving, providing opportunities for financial education to up-and-coming generations, and mentoring family members in the family business. The family wealth vision shouldn’t be a once-per-year thought but should be guiding principles they can carry into their everyday life.

The more consistent you are in tending to your family wealth plan, the deeper you’ll see it sink into the DNA of future generations.


Get started!

The time to start is now! As Bhaj says, “Establishing purpose for the family money is essential to creating and sustaining harmony in the family. It provides a foundation of understanding and agreement regarding the family money and will help to clarify that family money is not simply meant to satisfy specific individual needs.”

If you found this article beneficial, let us know how we can support you in implementing your family plan. The right team can clear the confusion and make this a fruitful and enjoyable process. For more on working with our team, see How We Work.

Mallory Hall - Alterra Advisors

Mallory Hall

Financial Advisor

About the Author

Mallory brings more than a decade of experience in boutique wealth management and institutional finance to Alterra. A Pacific Northwest native, Mallory completed her degree in Finance at Seattle University and later earned Certified Financial Planner™ and Certified Private Wealth Advisor® designations. She credits that education to a wonderfully supportive extended family. As she tells it, her family’s unwaveringly support inspired her passion to pass this education on to others.

Mallory looks at her financial education as a life-changing gift that she shares with enthusiasm. She thinks math is fun, and markets are interesting, but the work of a financial advisor is about doing good for others. Mallory has a natural knack for the analytics, but she is motivated by how this skillset can be applied directly to improve the everyday lives of her clients. Because she stresses the educational role of a financial advisor, Mallory’s ultimate goal is to be a “multi-generational advisor” guiding a family’s assets and goals as they change from one generation to the next.

In her spare time Mallory loves exploring the outdoors with her family. She’s also a passionate supporter of her husband’s business where they craft custom frames for a wide range of fine art.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

The post Transferring Wisdom with Your Wealth appeared first on Alterra Advisors.