I spend a lot of time thinking about wealth. (Sometimes it’s my own wealth, but mostly it’s clients’.)
On the job, I have the privilege of helping families create a framework for successful wealth transfer. And at home (as one of eight children, no less), I worked closely with my father and siblings to distribute my mother’s possessions after her death, and we’ve been making plans to carry out my father’s wishes when the time comes.
Regardless of how much wealth you have, it’s a big part of life. And I’m not talking about wealth as defined by Merriam-Webster. Wealth involves a lot more than material objects and zeros on an account statement. It gives you the freedom to choose your lifestyle, the ability to support your values, and the opportunity to help your loved ones. Wealth is monetary net worth, but it’s also a means to build your legacy, share your values, and pursue your dreams.
Pass it on
In the presentations I give to families about wealth transfer, I often reference the quote “from shirtsleeves to shirtsleeves in three generations” as a cautionary tale. Across time and cultures, wealth usually doesn’t survive three generations. It takes effort to earn wealth, and it takes effort to preserve it.
A lot of families don’t successfully transfer wealth to their heirs. But perhaps what’s more shocking is the top reason why these wealth transfers don’t succeed: lack of communication and trust.
Here, and in a subsequent post (coming later this summer—stay tuned), I’ll outline the five keys to successful wealth transfer. Spoiler alert: None of them are about dollar amounts or bottom lines. All of them are about communication.
The first 3 keys to successful wealth transfer
1. Identify what’s important.
You can’t take your wealth with you when you go. So unless your plan is to deplete your assets before you pass away, it’s important to plan ahead.
Start by creating a family mission statement. If the term “mission statement” reminds you too much of a lofty ideal printed on corporate letterhead, take a different approach.
I’ve worked with families who’ve simply identified four values or traits that resonate with them. (If you need a visual, think of a family coat of arms.) The most important thing is to get consensus on what’s important to your family and write it down for future reference.
This one sentence (or four words) is a tangible reminder of what’s important. It can have the power to improve family dynamics, inspire future generations, and establish guidelines for decision-making.
2. Talk to each other.
Call it what you want—a family meeting, Sunday dinner, or an annual vacation—as long as you’re intentional and make time to talk with each other. In my experience, the most effective family meetings involve everyone (including spouses) and follow a format that feels right to the people in the room.
Some tips for making it work: Allow one person to speak at a time without interruption, respect each other’s unique perspectives, think long-term when making decisions, and honor your family values.
Each meeting is a new chapter in your family story, but nothing is written in stone. Be flexible and patient, and learn from mistakes along the way.
3. Get organized.
The official term is family governance. But when it comes down to it, we’re just talking about aligning each family member’s strengths and interests with roles and responsibilities that will support the family structure over the long term.
In the Duffy family, my oldest sister, Mimi, is extremely organized, so she’s in charge of making sure we all catch up on a regular basis—whether it’s a conference call or a family vacation. My sister Siobhan, on the other hand, remembers everything (about everyone). So naturally, we’ve appointed her the family historian. In some families, this role may involve formal recordkeeping. In others, the “job” is more of a hobby, accomplished by journaling or scrapbooking.
The purpose of family governance is to create a healthy family environment to make decisions, communicate, preserve tradition, and establish best practices. This promotes fair treatment, discourages feelings of entitlement, and aligns the purpose of your wealth with family values and goals.
Start talking (and keep talking)
Regardless of the amount of assets you have, every family has a lot to lose if the wealth transfer process isn’t successful. When the stakes are high, preparation is key. Luckily, mitigating the risk of loss is relatively simple. It starts with communication.