Banking & Finance and Law

Wealth as a tool to build families up, not tear them down

July 31, 2018
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In any family, wealth is a tool. Used wisely, wealth can fix problems and build opportunities for generations to come. Used irresponsibility, wealth has potential to damage or even break family ties.

The leading factor to ensure wealth is used effectively is transparent communication. Frequent, honest communication among all family members about the intention of wealth is essential. Transparent communication often comes from the top — the patriarchs, or “bread winners” of the family. Utilizing a third-party advocate, such as a financial adviser, to champion the communication of wealth — and where it lies — among family members may help reduce stress and tension to keep everyone on the same page.

In families where wealth is great, investments in retirement, education and philanthropy are common allocations of wealth. As patriarchs of the family age, they also may wish to build multi-generation family wealth. When a sizable estate is at hand, transparent communication can have the largest impact on maintaining family stability for generations to come. When beginning the process of planning an estate, the hopes, as well as the fears, for the wealth should be addressed. Language within trust documents and provisions on how an inheritance is to be used can provide security and peace of mind when one passes. A regular cadence of conversations among family members, encouraging all to share their opinion of how wealth should be utilized, will help estate professionals draft a trust plan to best serve all.

Special considerations should be made for those planning to leave an estate for heirs who are under the age of 18. For any situation, having a plan in place for the wealth will ensure the heir isn’t left with a large, lump sum of inheritance — and the ability to spend it freely — upon reaching the age of 18. Doing so will provide for the next generation for years to come.

Individuals passing down wealth to their heirs well before old age is a growing trend. In doing so, they are able to see the fruit of their labor being utilized and enjoyed by those they care for. However, especially in these cases, it is vital that one’s own late-in-life needs and retirement plans are considered first. Preventing oneself from living a happy, stress-free retirement in order to fund the activities of a family member can cause a strain in the relationship and leave both without the funds they need to thrive, as well as cause disdain between family members watching wealth be used irresponsibly.

Having honest conversations and demonstrating how to use money wisely can prepare younger family members for inheriting wealth. How a family views wealth varies based on family needs and dynamics, but strong planning and transparent communications remain essential for all. Money is a blessing and can open a lot of doors, but it is the guidelines set and the education gathered that can ensure wealth is used to build and not to tear down.