Transferring Wealth the Right Way

Transferring Wealth the Right Way

Why Intergenerational Wealth Transfers Fail 70% of the Time

According to a study that surveyed 3,250 wealthy families, 70% of the time when wealth is transferred to an heir, it is lost due to mismanagement, poor investment choices and other mistakes.

In their book, Preparing Heirs: Five Steps to Successful Transition of Family Wealth and Values, Vic Preisser and Roy Williams cite three reasons why wealth transfers result in so many catastrophes:

  • 15% of failed wealth transfers are a result of taxes, legal issues, and poor financial planning.
  • 25% of failed wealth transfers are because of inadequately prepared heirs.
  • 60% of failed wealth transfers are because of breakdowns in communication and trust within the family.

The problem I see is that the accumulation, management and retention of wealth is a direct manifestation of mindset and action. When families only focus on hard assets – the money – they lose sight of their most important assets.

You have three asset types and only focusing on the money or tangible assets leaves a gaping hole. If you are not able to properly pass on all assets to your heirs, you end up with break downs in family communication, misunderstandings, legal problems and squandered wealth.

Assets of Excellence

When most people think of assets, they think of physical things—money, homes, cars, jewelry—but these objects are a poor replacement for a person’s most valuable assets.

Your assets can be broken into three main categories:

  • Character Assets: Your meaningful relationships, values, health, spirituality, heritage, purpose, talents, and plans for giving.
  • Intellectual Assets: Your business systems, alliances, ideas, skills, traditions, and wisdom.
  • Financial Assets: Your physical wealth and how to pass along money in a way that is meaningful and is not going to harm its recipients by making them dependent and unhappy.

It is easy to pass along your financial assets. Simply set up a trust or foundation and they are distributed as you have instructed.

But what about your character and intellectual assets?

Often these assets are lost simply because there is not a structured way to identify them and pass them along. But there is a way to properly structure and create a meaningful legacy that takes into account your intellectual and character assets and may very well be the thing that preserves your financial assets.

When you look at the stats above, you'll see that 85% of failed wealth transfers are a direct result of not properly passing on intellectual and character assets and much of the remaining 15% could be solved by transferring these two asset types as well.

What is a Meaning Legacy?

Simply put, a Meaning Legacy preserves your life, lessons you’ve learned along your journey and vision for the future as a guide to those you care about. It’s not only about leaving behind something great after you have died. It’s about living life in a way that will positively impact those you love right here, right now.

A Meaning Legacy gives your loved ones so much more than good memories; it creates a dialog, a family narrative that will serve as the foundation for their decisions, loyalty and love. When a family is able to openly discuss important issues, have fun together, learn together and support each other, everything is better—from transferring wealth to family vacations.

Laura A. Roser
Life Transitions
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Laura A. Roser is the #1 expert in meaning legacy planning. She is the Founder and CEO of Paragon Road, a company that assists individuals in passing on their non-financial as ... Click for full bio

Don’t Be Tempted to Persuade Your Clients

Don’t Be Tempted to Persuade Your Clients

Recently, I've been seeing a lot of articles about Advisors persuading clients to move from active management to passive management. Persuading clients to follow the way you manage investments is a big mistake. Do this instead.

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Paul Kingsman
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Paul Kingsman helps financial services professionals overcome distractions to achieve success sooner. Combining his experiences as an Olympic medalist and his background as an ... Click for full bio