Published on Kiplinger.com
By Anne Kates Smith, August 19th, 2024
Preserving the family money beyond a few generations isn’t an easy task.
You’ll find similar sentiments in almost every language, all expressing the same thought: It’s nearly impossible to pass on family wealth and have it last beyond your grandkids. From shirtsleeves to shirtsleeves in three generations, goes the early 20th-century American proverb. Then there’s the 19th-century British version: Clogs to clogs in three generations. And from Italy, date uncertain: From the stable to the stars and back again.
And statistics back up the folklore. Studies have found that 70% of the time, family assets are lost from one generation to the next, and assets are gone 90% of the time by the third generation.
That’s because a crucial element of successful inheritances is often neglected. Traditionally, the focus has been on the givers of wealth, but it should rather be on the receivers. Investing assets wisely and crafting a good estate plan are crucial to success, but so is preparing the heirs.
Sometimes parents are silent because they’re not sure their money will outlast the health challenges of old age or mercurial financial markets. Whatever the reason for the lack of money talk, heirs who are ill-prepared are left to wonder why their parents thought they were incapable of handling the information or couldn’t be trusted with it. Better to be upfront about the wealth you have and your plans for it. And don’t forget about how it came to be in the first place, especially if the wealth was created several generations ago.
