In Successful Wealth Transfers, Trust May Be More Important than Trusts | Rodgers & Associates
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In Successful Wealth Transfers, Trust May Be More Important than Trusts

It is estimated that 70% of wealth transfers fail to extend to the third and fourth gener­ation of heirs1. Why? Is it because more and more people are passing away without estate documents? Or because the documents were not set up correctly? The unfor­tunate reality is it’s because the receiving gener­ation either loses, squanders, or mismanages their inher­i­tance. Often, this gift meant to help future gener­a­tions can have a negative effect on the lives of the heirs. For many of our clients who hope to leave an inher­i­tance to their children and grand­children, this statistic is alarming to say the least. So, how can we begin to correct this problem?

Why wealth transfers fail

It is reported that 60% of the time wealth transfers fail because there is a breakdown of trust and commu­ni­cation within the family and 25% of the time because the heirs were unpre­pared to be respon­sible for their inheritance1. By working on these two areas and having the assis­tance of a reputable Estate Planning Attorney to set up estate documents correctly, families can greatly increase their chances of a successful wealth transfer.

How to talk about money with your family

Fixing trust issues within your family can be a difficult and emotionally taxing endeavor. Some families with deep trust issues find it helpful to hire an outside counselor or therapist to help the family work things out. In many cases trust can be improved by proac­tively working to enhance commu­ni­cation.

Money can be an intim­i­dating topic of conver­sation with your children and grand­children. At the beginning, these conver­sa­tions can be difficult and awkward, but the more money is discussed, the easier it becomes to have those conver­sa­tions.

Use charitable giving as a learning opportunity

Chari­table giving can be a great way to not only talk about money with your heirs but to also teach them valuable lessons about money. By allowing family members to designate a portion of your giving to non-profits they choose, you can teach due diligence and presen­tation skills by having them research the non-profits that spark their interest and presenting those findings to the family. The value of money and impact it can have can also be taught. One way to manage this giving would be to establish a Donor Advised Fund. This will also give them the oppor­tunity to learn about invest­ments and hone their budgeting skills to determine how much of the fund should be distributed. These are skills they will need in the future to manage their inher­i­tance well.

To begin improving the wealth transfer failure rate, we need to start doing something differ­ently. We need to have these conver­sa­tions and prepare our heirs while we are still living. Having well-prepared estate documents estab­lished is an important pillar of your estate plan, but don’t forget the often overlooked pillars of trust, commu­ni­cation, and heir prepa­ration.


1 Source: Williams Group Wealth Consul­tancy. theWil​liams​Group​.org