Financial Times reports that among those born in the 1930’s, only 38 percent expected to receive an inheritance at some point in their lives. This compares to 75 percent of those born in the 1970’s. Over the next several decades, the biggest and wealthiest generation in U.S. history will transfer roughly $30 trillion in assets to their Gen X and millennial children.(1) Is the next generation ready for this incredible shift in wealth?
Often, the first time a child makes a financial decision is after the parent has passed. Couples tend to shy away from discussions on money with their spouse as well as with their children. 70% of families fail at transferring wealth, according to research conducted on over 3,250 families who transferred wealth.(2)
There are varied reasons for this. Family of origin can impact how spouses talk and feel about money and financial investing. Discussions can be emotionally charged. Many baby boomers fear that their children may take advantage of them if they know the true extent of their assets. They fear that children may feel entitled to their inheritances or manipulate their parents with guilt or other tactics if they know the whole financial story. Non-traditional family structure, a family business transfer or family dynamics can be additionally challenging. Does inherited money reduce drive and ambition or does it become a tool to create meaningful lives for the next generation?
Sadly, general family discussions have been found to be the least effective in financial education for the next generation. And most children are not known to have a flash of financial acumen upon inheritance. Effective communication must include discourse on the increased complexity that sudden wealth brings including short and long-term options to protect the inheritance.
“Transferring wealth is difficult but it can be done successfully with the right tools”, says Sharon Olson, CEO of Olson Wealth Group in Minneapolis. “I found the most successful families have one thing in common, they prioritized family harmony to ensure a smooth transition.” A key component is to identify a family mission statement as well as a strategy to attain it.
Olson Wealth Group helps bring multi-generations to the table to open conversation about values and investment decisions. We start with family meetings to craft a family mission statement that builds trust and defines and communicates your family values. This discussion may include what your heirs should be doing to prepare for wealth and responsibility so that wealth is a force for good in their lives and not a burden. This insight builds a foundation for higher levels of unity and greater clarity in life choices.
In our multi-generation and intergenerational planning, we provide meaningful options including trust selection and management, tax-sensitive giving strategies, pre-nuptial agreements, charitable giving and private foundation, family limited partnerships and family installment sales. Planning in advance, we can guide you and the ones you cherish to match aspirations with strategies.
We welcome your questions. It’s never too early to start planning the process of transferring wealth.
(1) CNBC Advisors brace for $30 trillion ‘great wealth transfer” by Andres Osterland, CNBC.com June 16, 2016
(2) “How to reverse the 70% failure rate.” Forbes.com December 2011
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.