To make that wealth last forever, you're probably going to need future generations to participate in replenishing that wealth.
By Stephen K Lehnardt
If you have wealth to pass on to the next generation, you may hope that your wealth will continue on for generations to come. Making it last is a tough goal. Success depends on the next generation to keep the wealth going and growing instead of spending it until it is gone. However grand your goals may be, the startling reality is that most inheritances fail to lift up the family long-term.
You may be familiar with the old expression: “shirt sleeves to shirt sleeves in three generations.” This traditional American translation of the Lancashire proverb: “there’s nobbut three generations atween a clog and clog,” is mirrored around the globe. Reuters picked up on the issue of failed long-term inheritances in a recent article titled “How wealthy families blow their assets.” The kinds of problems that arise within families are multifaceted, but the numbers tell a similar story: inheritances have a failure rate at 90 percent by the third generation.
Unfortunately there is no magic or miracle formula for a successful family inheritance from generation to generation. Nevertheless, there are some important thoughts to consider as you plan and in talk with your family. Managing wealth is about responsibility. Therefore, not only do you have to be thoughtful and responsible in planning the inheritance you leave, but you want to teach and encourage thoughtful responsibility throughout the family.
As the original article mentions, most heirs have a dubious understanding of how to manage an inheritance in the first place – how to use it and live with it, rather than grind it down. Fortunately this skill can be learned.
So how will you teach your heirs and help ensure prosperity for your family, your heirs and even your heirs’ heirs? It’s a difficult challenge but a worthy goal.
For more information in Liberty, MO and the Kansas City Area about effective estate planning and to access free information and tools to organize your estate, visit our elder law and estate planning website.
Reference: Reuters (May 6, 2014) “How wealthy families blow their assets”