For many families, the estate planning process extends beyond simply designating beneficiaries. While the primary objective is to transfer assets in an orderly and tax-efficient manner, it is equally essential to focus on the preservation of wealth across generations.
The successful transition of wealth from one generation to the next is most effectively achieved when family members share a common understanding of how the family wealth should be utilized. Although the original wealth creators have the final authority over asset distribution, ensuring that receiving family members are informed and aligned on the intended use of the wealth can significantly aid in preserving those assets as they pass to subsequent generations.
A recent Forbes article titled “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning” highlights that reaching consensus can be challenging, particularly when family members bring diverse perspectives and values to the estate planning dialogue. However, effective communication can proactively mitigate potential conflicts that may arise across generations.
One of the primary obstacles in maintaining multi-generational wealth is the varying outlooks on wealth among individuals and generations. Today’s families may encompass four or even five generations, which can lead to differing views on several topics, including:
Personal Values: Family members may have distinct belief systems and values, influencing their perspectives on work, social and political issues, relationships, and more.
Investment Priorities: Different generations may prioritize socially responsible investing to varying degrees, potentially leading to conflicts over investment strategies.
Economic Perspectives: Older generations, having experienced various economic conditions, may hold viewpoints that contrast significantly with younger generations, especially those facing high inflation and economic instability.
Communication Styles: Not all family members are comfortable discussing financial matters openly, particularly regarding the extent of financial resources available and their allocation.
Perceptions of Financial Advisors: Family members may have differing views on the role of financial advisors, with some viewing them as trusted allies while others remain skeptical.
While these differences can pose challenges during the estate planning process, they are not insurmountable. Establishing a long-term, adaptable plan tailored to current and future generations can facilitate effective management of the family’s generational wealth, accommodating changing needs and evolving economic conditions.
Reference: Forbes (April 18, 2022) “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning.”
