Protect your family’s future by discovering what you don’t know.

What is Wealth Transfer Failure?

There are two types of wealth transfer failures. The first type occurs in the one generation, the second type occurs in three generations.

Loss of financial assets during the inheritance process is the traditional method for measuring wealth transfer failure. According to a 25 year study conducted by Roy Williams, 70% of all financial wealth transfers fail in one generation. This is a one generational wealth transfer failure. Families who successfully beat the first failure have a second type to overcome in the third generation that is known as shirtsleeves to shirtsleeves. 91% of all multi-generational financial wealth transfers fail by the time the assets reach the grandchildren.

Based on our experience, measuring wealth transfer by loss of assets isn’t enough. We include unnecessary stress and broken relationships as conditions of wealth transfer failure because it allows us to address the conditions that cause them so we can prevent them from occurring. Imagine finding a key to safety deposit box, but know knowing what bank it belonged to. The extra stress of trying to locate the correct bank is an example of unnecessary stress. When a family becomes estranged through settling an inheritance, a wealth transfer failure has occurred.

What are the conditions that contribute to wealth transfer failure?

We live in a culture where death, aging and money are taboo topics. Because we aren’t comfortable with these topics, and don’t know how to talk about them, we do our best to avoid them. Over 50% of adults don’t have a will or estate plan. Few parents know they loose the ability to make medical or financial decisions for their children on their 18th birthday.

We are blind to the truth. A survey done before an inheritance occurs shows we believe 93% of failures are caused by professional errors, taxes and legal issues and 7% by family issues. A 25 year study of 3,500 families showed that 97% of wealth transfers are caused by family issues!

What are the family issues that cause loss of assets?

97% of wealth transfer failures are caused by the family! The three areas that cause wealth transfer failures include:
60% lack of communication and trust
25% unprepared heirs
12% no mission statement.

What is the solution?

You begin by recognizing the truth that 97% of wealth transfer failures are caused by family issues. Then, you implement a solution that address these issues by adding a Legacy Plan to your existing tax and legal plan. Legacy Planning isn’t a recognized industry yet. Practitioners have various names, such as heritage planning, exit strategy planning, or family dynamics planning. No matter what it is called, Legacy Planning addresses the family issues that cause wealth transfer failures. The three most common issues are unprepared heirs, lack of communication and trust, and no family mission statement. We are leading the effort to see Legacy Planning become a recognized industry.

Why haven’t I heard of Legacy Planning?

Access to legacy planning is currently offered through select colleges (link to Family Business Alliance here) and ultra high net worth families supported by the family office, such as the Family Office Exchange. Our mission is to provide easy access to affordable legacy planning tools.

What is a Family Enterprise?

Family Enterprise refers to families who own a family business or manage their wealth as if it were a business with the intention of providing a financial advantage for future generations.

How is family wealth managed like a business?

It begins with an intention to provide a financial advantage past the third generation. Financial assets are set aside to benefit future generations. Next, the family gathers a group of advisers (like a board of directors). A legal plan is created to protect financial assets and addresses the technical aspect of wealth. A legacy plan is created to develop family culture, communication and relationships and addresses the personal aspect of wealth and is the key for success.

What is the significance of the third generation?

Historically, 90% of families who create wealth lose it by the third generation. Cultures across the globe have their own name for the three generational cycle of wealth creation, transfer and loss, but it is mostly commonly referred to as shirtsleeves to shirtsleeves. Providing wealth to the fourth generation indicates your family has beat the shirtsleeves to shirtsleeves cycle.

How do I get started?

When you are ready to take the next step for your family, schedule a complimentary call with Cindy Arledge.