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Forbes

Wealth Stewardship: Setting Future Generations Up For Success

Media headlines about the wealth and succession plans of famous enterprise families offer a window into how complicated—and often messy—wealth transfer can be. Yet, they also highlight how legacy and wealth intertwine through generations, drama aside. What's clear is that, with the right strategy and good communication, wealthy families can position their next generations for success. In my experience running a family office, I've seen this issue firsthand many times. I work with successful individuals from diverse backgrounds and industries. Despite their varied paths, nearly every wealthy family shares the same worry: whether their children and grandchildren will be responsible stewards of the family's wealth. A 2020 Campden Wealth survey found that among inheritors, more than half (54%) are worried that they will lose the wealth their family created, while 44% are anxious that their children will lose it. With the right strategy and good communication, many families are positioning themselves for long-term success and avoiding becoming just another statistic. Here is what I see the most successful families doing to facilitate healthy family dynamics and grow their wealth across generations. Prioritize Financial Education One common thread among families who successfully maintain wealth is a strong commitment to, and investment in, financial education. They ensure the next generation learns not just about spending, but also about budgeting, investing, and the nuances of wealth management, starting from an early age. Many families even take it a step further, using specialized courses and formal programs to equip heirs with the skills and mindset necessary to manage inherited wealth wisely. For example, several top business schools such as Columbia, Harvard, Kellogg, and Wharton offer intensive, short-duration programs that cover topics relevant to wealth stewardship. Foster Open Communication Talking about wealth doesn't always come naturally to wealthy parents – these conversations can be uncomfortable, and if no one ever discussed with you, you may feel unprepared. On the other hand, being transparent about financial matters can significantly improve your children's abilities to lead financially sound lives. Families that openly discuss their wealth, including estate plans and wills, are better equipped to manage expectations and prepare heirs for the future. Open dialogue can also help prevent misunderstandings and conflicts that often arise during wealth transfers. Create a Shared Vision Successful families create a shared vision for their wealth that aligns with their values and goals. They involve multiple generations in discussions about this vision and "write it down," so everyone in the family knows what it is and can see their imprint on it. This collaborative approach helps ensure that all family members are invested in the long-term success of the family's wealth. Establish Governance Structures Successful wealthy families create formal governance structures, such as family offices or family councils, to manage their wealth and make collective decisions. These structures help maintain family unity and ensure that wealth is managed professionally across generations. They can also help with communication because everyone can see what the expectations and rules of the road are. These families also often carve out a portion of their assets for individual family members to manage for spending and charitable purposes. Encourage Entrepreneurship and Individual Achievement Children who grow up in affluence sometimes lack the same work ethic or financial savvy as their wealth-creating predecessors. Therefore, it can be valuable to encourage heirs to pursue their own passions and careers. This approach helps preserve the work ethic and drive that led to the initial wealth creation and improves the sense of self-worth among individual family members. Additional Keys to Managing, Growing & Preserving Family Wealth Other key areas to focus on when teaching your children about wealth include the importance of tax planning, diversification, and finding a financial advisor who's the right fit. Successful families work with financial advisors and estate planning attorneys to develop tax-efficient strategies for transferring wealth to future generations, often using tools like family limited partnerships, grantor trusts, and charitable giving. They also prioritize helping their children build strong relationships with their advisors, ensuring continuity as the next generation takes on the responsibility of stewarding the family wealth. Write Your Own Story Although the possibility that family wealth may be gained, lost, and squandered over a few generations exists, it is not an inevitable fate. By prioritizing financial education, fostering open communication, and implementing strategic wealth preservation tactics, families can increase their chances of maintaining their wealth and legacy across multiple generations. The key lies in viewing wealth not just as a financial asset but as a responsibility that requires active management, shared values, and a long-term perspective.