Intergenerational Planning – Starting the conversation…

At Christmas time, as we gather together with family and loved ones, it is timely to reflect on the many gifts we have received throughout the year and indeed in life.  For many it can also be an anxious time, trying to think of what gifts to share with others. 

In this regard, a gift that we are observing becoming increasingly more valuable is that of the considered and active transfer of personal values, knowledge and wisdom – between generations – arguably a much greater asset to imbue in the next generation.

Whilst this concept may appear to be a noble endeavour and great in theory, it is fair to say that the very notion of discussing one’s financial affairs with the next generation is deeply personal and for many not considered appropriate or perhaps necessary until much later in life.

Culturally, the discussion of family wealth between parents and children has been somewhat taboo, arguably due to the fear of the unknown influence that ‘significant’ wealth may inflict on the hearts and minds of the inexperienced. 

Whilst this primal concern is unquestionably well justified - the emerging evidence of prolific failed estates (ie transitions) globally places the issue at the forefront, if not the centrepiece, of intergenerational wealth planning.

This challenge stems from extensive research that concludes most parents do not adequately prepare their children (or heirs) for receiving wealth.  This is becoming an increasingly important issue, as in the US alone, over $1 trillion will pass from one generation to the next every year for the next 50 years (Schervish 2001), peaking in the mid 2030’s.

It is estimated that 70% of family estate plans fail with a significant number of beneficiaries losing their assets after the inter-generational transition event has occurred[1].

A 20 year study of the differences between successful and unsuccessful post-transition families found that the failures were driven by the following:

  • 60% caused by an internal breakdown of “trust and communication” within the family
  • 25% caused by a failure to “prepare their heirs”
  • 10% caused due to a lack of agreed-upon “mission” for the family wealth

Poor communication and a lack of education are part of the issue here.  But it is not just technical training about how to invest wisely – it extends to a failure to transfer values, experience and wisdom to the next generation or perhaps it just comes down to the psychological make up of individuals.

The focus needs to shift from Preparing Assets for Heirs, to Preparing Heirs for Assets.  We believe it a responsibility of APW Partners to help facilitate the smooth transition of wealth to the next generation and prepare them for the responsibility and freedom this brings.

We are seeing this shift in our own firm, where we commonly recommend conversations with clients start with estate planning and only turn to the management of investments once lifestyle and inter-generational wealth transfer goals have been discussed, refined and agreed upon.

So what are the main concerns that financially successful parents have for their children and heirs? 

One study listed the following top 6 concerns:

% Expressing Concern

Topic of Concern


Too much emphasis on material things


Naïve about the value of money


Spend beyond their means


Initiative could be ruined by affluence


Won’t do as well financially


Hard time taking financial responsibility

Source: US Trust (2000)

So this Christmas, we encourage you to ask yourself the following wealth transition questions and use them to initiate a conversation with your children:
  • Will the transition of family wealth have a positive impact on the lives of your children and grandchildren?
  • What would your children do if they received an inheritance today?
  • Have you and your children agreed upon a written long-term mission for your family wealth to use as guidance for your heirs and their professional advisers?
  • Are your heirs in general agreement concerning the roles they wish to take in the transitioned estate, including their qualifications and experience for these roles?
  • Because your estate transfer will be the largest financial event in the lives of your children, have they been prepared to manage/oversee those assets?
  • Without mum and dad to fall back on as a “safety net” or “backup”, do your heirs have suitable professional advisers upon whom they can call for help?
  • Have you considered a “training period” for your heirs to demonstrate competence in making financial decisions?  This may include attending regular review meetings with your adviser.

Some may feel the above questions suggest a tendency to ‘rule from the grave’.  Some people may just want the next generation to be free to make decisions. 

Every family is different, but starting a conversation with your family about wealth transfer can give you great comfort and peace of mind that the transition period for your family can be successful.

You may also find helpful our recent article, Children Inheritance – How Much Should You Leave Them?

Authors: Rick Walker & Greg Keady

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Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.