Successfully transferring wealth to the next generation requires healthy and open communication within a family. In this Insights episode, learn how philanthropy can create the unique opportunity for families to do this by sharing values, making decisions, and giving back together.
Family Learning
Resource Search
Charitable planning can be an important part not only of managing income and estate taxes, but of engaging the family and strengthening family values. Adding in a multigenerational component can make it even more meaningful and compelling. Just as every family is unique, so is the philanthropic approach where communication is key and there is more than one way to involve a family in philanthropy.
For many families, discussing wealth transfer and inheritance issues can be challenging. Fear of demotivating heirs can cause wealth holders to withhold vital information. But the rewards can prove significant when family members work together to overcome their fear by improving communications and strengthening trust. While every family is unique, there are some best practices among families who have decided that having an inheritance plan—including responsible ownership education—is better than no plan at all.
For insights on integrated wealth planning, this issue of The Advisor presents a view from the top with Joe Kahn, The New York Times Managing Editor, the impact of globalization 2.0, and the U.S. presidential election 2016 and the candidates’ tax platforms. Also in this issue are the best practices in providing age-appropriate transparency when it comes to discussing a family’s wealth plan. Following it is the takeaway on the advantage of Delaware’s laws on directed trusts.
It can be surprising to hear that just 30 percent of families successfully sustain their wealth beyond three generations. The reasons for wealth transition failures are generally personal rather than technical—resulting from a breakdown of communication within the family, inadequate preparation of heirs, and lack of a shared family vision. Successful families consider the impact of wealth on their family and look beyond financial capital to consider human, intellectual, and social elements of unique wealth.
What do people really mean when they talk about “impact investing?” Why do people make impact investments, and how do they do it? What counts, and what doesn’t? This primer provides family enterprises with clear explanations of the “why,” “how,” and “what” of impact investing. Whether families are just dipping their toes in the water, or ready to dive in, families can make more impact investments more effectively.
Jessica Jackley, cofounder of KIVA, the world’s first microfinance website, shares her unique wisdom on financial inclusion and social justice. Jessica highlights stories and lessons from her book, Clay Water Brick: Finding Inspiration from Entrepreneurs Who Do the Most with the Least, as well as experiences from her own life as an entrepreneur, investor, and philanthropist.
The expression “an elephant in the room” is readily recognized to mean an uncomfortable situation not talked about but clearly known to all. When elephants make unwanted appearances—at family dinners, social gatherings, meetings—people get uncomfortable and begin to shut down. When this happens, they begin to operate from assumptions and draw conclusions based on their own perceptions. Overtime, these actions may cause family relationships to erode.
All business owners will transition their business at some point in the future. Whether it is a transfer within their family, such as to the next generation, or to an existing business partner or employee, or sold to a competitor or outside investor, transition will occur. Just as successfully run businesses do not happen overnight, transitioning well cannot happen without devoting the necessary focus and intentionality.
While wealthy families prefer to pass nearly two-thirds of their wealth to their children, grandchildren and other heirs, they grapple with a fundamental question: Can their wealth benefit their generation and be passed on to future generations while also having a positive impact on those future generations? Experience shows that sustaining family wealth is indeed possible when families begin to see their wealth not only as a series of activities that need to be performed, but also as an enterprise that needs to be managed.