Successfully preserving wealth across generations is not easy. Transferring values is even harder. Many wealth creators have suffered the heartbreak of seeing their money and family cohesiveness diluted after only one or two generations. Other families have created positive, enduring legacies that persist into the third, fourth and fifth generations.
What have the successful families done differently? In our experience, these families have prepared wealth for the next generations not only through thoughtful planning, but also through timely communication and education. For many families, a multigenerational family meeting offers a perfect opportunity to start this preparation.
Why Have A Family Meeting?
In our experience, gradually sharing a wealth plan with the next generation creates an atmosphere of trust, as family members welcome the transparency and reduced uncertainty a unified message offers. Additionally, when younger family members feel they are trusted, they are more likely to understand and respect the responsibilities that accompany an inheritance. If the wealth creator augments this trust with a solid financial education and communication of the family’s history and values, the next generation has a better chance of adopting a stewardship mind-set—a sense that the family shares something greater than financial assets.
A family meeting offers a safe, structured environment for communication and an opportunity to detail the family wealth plan, either in part or in full. Family meetings come in all shapes and sizes. Each is unique and dependent on the family’s objective. Meetings may be in-person or virtual, span an afternoon or a weekend, and include a single generation or multiple generations. In all cases, however, great care should be taken to prepare participants for the meeting. Everyone should be given the opportunity to weigh in on the agenda, and they should be told what to expect and what is expected of them.
When To Start
The timing of a family meeting depends on several factors, including participants’ ages and the meeting objectives. Ideally, family meetings start when the next generation members are in their teens and early 20s, and focus on providing a basic financial education. If members of the next generation are trust beneficiaries, we recommend starting this process well before any required disclosure date, typically at the age of 18. For these meetings, we suggest crafting age-appropriate lessons on personal finance and investments that layer in the family’s values and history. If the family owns a business, we typically encourage them to start formalizing their decision-making process—essentially creating a family governance structure—before the third generation is of working age.
However, families do not have to wait until the next generation members are teenagers. Many families benefit from regular meetings that begin when the children are younger. These family meetings may focus on the importance of developing savings plans from allowances or finding worthwhile charitable causes to support. These types of early meetings help children develop skills they will use to integrate family values with wealth stewardship plans (Figure
1). Teaching The Meaning Of Money
Rather than initiate family meetings to share a wealth plan, families may want to consider a more basic goal for their meeting: teaching children about money.
We’ve used an interactive exercise at Bessemer Trust called “Money Messages,” popular among younger clients, in which each person identifies the message he or she grew up with and the message he or she would like to live by. Sometimes the messages are the same, but most often they are different and reflect how far along the family is in integrating wealth into their lives. In these and other meetings, family members get to know each other on a slightly different level and learn how to work together. Interactive exercises also allow elders to observe the younger generations’ family dynamics and maturity levels in order to decide how much of their wealth plan to share and when to share it.