“A rich person should leave his kids enough to do anything, but not enough to do nothing.” (Warren Buffett)
In the next couple of decades, families with intergenerational wealth will be transferring far more than assets (including homes, holiday homes, and successful businesses and investments). They will also be transferring value systems and philanthropic support, which South Africa is so reliant on, especially now that there is reduced funding from the US.
Against this backdrop there’s an international statistic that remains true. Among super wealthy families, on average more than 70% of wealth is lost by the second generation. And by the third? Almost 90%.
This daunting statistic, however, can so easily be overcome. This is where we come in. Family offices are all about preserving intergenerational wealth. We provide planning and develop shared goals. We don’t focus only on the best investment options and tax planning strategies. We focus on how to grow, manage, and, above all, respect the wealth we inherit. We focus on family unity.
If you are in a very favourable position to provide for your next generation, these are some suggestions for success:
1. Demystify wealth
Many clients are saddled with the British taboo about talking about wealth. Wills are concealed, leading to potential conflicts and the breakdown of precious family relationships.
This dilemma can easily be avoided by:
- Establishing family forums: Organise formal, frequent meetings so that family members of all ages can learn about the family’s financial philosophy, history, and objectives. This helps normalise money conversations, making it easier for everyone to be honest and at ease when discussing the guiding principles of wealth preservation.
- Telling the family story: Hard work, creativity, risk, and tenacity are the keys to wealth. Tell the tale of the wealth’s creation regularly. Instead of just fostering ownership, this fosters respect and a sense of stewardship. And most significantly, let the beneficiaries of the wealth tell their stories about how the burden of inheritance affects them.
2. Implement a holistic estate plan
Planning is the bridge between generations and as such should be anchored in values and built to endure. To achieve this goal, you must:
- Seek expert advice: We are here to assist. Estate law is a complicated and dynamic field. Consulting with expert financial planners, lawyers, and fiduciary specialists is an essential investment in the future stability of your legacy. The minimal cost is not relevant. We can assist you in organising your accomplishments to attain your goals.
- Take into account long-term structures: For many families, using trusts or other similar arrangements can help safeguard assets from potential creditors, guarantee equitable distribution to heirs, and offer a framework for management over several generations. Selecting a structure that works for the size, complexity, and values of the family is crucial.
- Review and update frequently: An estate plan is a living document. It must adapt to changes in financial situations, laws, and family circumstances (marriages, divorces, and births). The plan’s effectiveness and relevance are guaranteed by an annual review.
3. Cultivate financial literacy
Your future generations need to be financially literate. They may be pursuing other careers, which don’t involve family financial obligations. But should still learn the value of being part of the process of the preservation of their family’s wealth.
A fortune is sure to be lost if it is left to someone who is not knowledgeable enough to handle it. Giving the next generation the self-assurance and competence to be good stewards is the aim.
4. Instil a unified set of values
Money is ultimately a tool. It can lead to conflict if there isn’t a common goal. But it can become a strong force for good if there is a common vision. Here are some ways to achieve clarity.
- Mission statement. Establish a mission statement for the family that also considers all future beneficiaries.
- Vision and objectives. Together, draft a statement outlining the family’s guiding principles, charitable objectives, and future vision. There’s nothing like a compass for the future.
- Give back. The establishment of a family foundation or group charitable contributions can serve as a unifying force by teaching the next generation about strategic grant-making, social responsibility, and the significant influence that one’s wealth can have on others. It turns heirs into stewards of a legacy rather than consumers of wealth.
The bottom line
This article may or may not be relevant to you, but it does assist all of us to develop money values that go beyond the numbers. We’d love to discuss your value systems with you. A tiny adjustment to your budget may assist you in achieving a happier future.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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