That depends on the work that both givers and receivers do before the handoff, experts say. Without proper communication, guidance and planning, wealth and legacies can be lost to taxes, squandering, conflicts or simply forgotten. A 20-year research project on 3,200 families by wealth consultancy Williams Group shows 70% of wealthy families lose their wealth by the second generation, and 90% by the third.
“Money and wealth can hurt beneficiaries in numerous ways, but the way to have the money and wealth help them are just as vast,” said Jillyn Hess-Verdon, team leader of Frost Brown Todd’s family office practice.
Lack of communication and trust within the family is the leading cause (60%) of wealth transfer failure and 25% is due to heirs’ inadequate preparation, knowledge and skills to manage an inheritance, the Williams study said.
It’s “touchy to bring up these subjects and split money before death,” said Jennifer Baick, head of Mercer Advisors’ financial planning group.
Two-thirds of givers admit to procrastinating family wealth-transfer conversations, according to a national RBC Wealth Management survey. Only 39% have provided guidance or instructions to their heirs on what they should do with their inheritance, including how to spend and invest it or give it away to charities.
Nearly all (99%) of beneficiaries want to honor the wishes of their benefactors and be good stewards of their family’s wealth, RBC said. However, their top concern is being financially responsible with what they inherit. Only 54 % of them said they’re very prepared to receive an inheritance.
Text: 2000.0606.10.1–FUNERALS10–nikon digital image–Rita and John Wessel of Bridgetown sit on a bench near what will be their burial plot in a section of Spring Grove Cemetery Tuesday. They looked at the Jon Deitloff Funeral Centre, background, and decided to buy funeral plans for the future, thus lifting the burden of funeral planing and expense for their children. Photo by Craig Ruttle/Cincinnati Enquirer You’ve planned out everything — including choosing your burial plot. But those plans are worthless if your successors can’t find them. Talk to your family before they will need those health care and estate planning documents. -_20000607.jpg Youve planned out everything including choosing your burial plot. But those plans are worthless if your successors cant find them. Talk to your family before they will need those health care and estate planning documents.
Yes, when givers are reluctant to discuss money, heirs can encourage and frame talks with family dynamics in mind, Hess-Verdon said.
“If ‘the kids’ are worried about the one sibling or family member who is always asking for money or ‘loans’ this can be a difficult subject to bring up with the parents,” she said. “However, a responsible family member, who is in the process of setting up their own estate plan and has an upcoming meeting with an attorney, can often ask the parent for their advice in making these decisions, and the parent will often relay the important plan that they set up with their attorney as an example.”
Advisers, lawyers and accountants are third parties who can help neutralize conversations, keeping them focused on planning, experts said.
Beneficiaries don’t have to rely on the same professionals as their parents or grandparents, either. They should find ones with whom they feel comfortable, Baick said.
“First and second generations engage differently,” she said. “Second generation is more digitally native and interface and interact with investment choices. First generation may have all their people, lawyers and accountants in a building.”
“Financial literacy is important for young people,” said Jennifer Quent, director of family office services at Kaufman Rossin.
High-net-worth families with complex estates often use a family office to help, she said. Heirs “may have to learn about different kinds of trusts, taxes, gift giving. There’s a lot of education involved,” Quent said.
Family offices are private wealth management firms that help wealthy families manage everything from investments, taxes, and legal affairs to philanthropic activities, day-to-day concierge services and even estate planning and education with heirs-to-be. There are different levels of family offices, but they’re usually reserved for families with a net worth of at least $30 million.
For those with fewer resources and less complex estates, virtual family office tools like those from leafplanner or Farther Financial can help families collect, organize, store and communicate documents and plans, Quent said.
Without any knowledge of the assets, where they are and what the plans are for them, or even whom to call to find out, receivers will be left in a “frantic tizzy because they might find they have to make all these big decisions within 9 months (of someone’s death),” Baick said.
