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5 tips to prepare for the Great Wealth Transfer

November 3, 2023 Article 4 min read
Sara Montgomery Wealth Management
The era of the Great Wealth Transfer is here; now’s the time to prepare your family for the responsibilities of receiving multigenerational wealth and continuing the family legacy. Here’s 5 tips to help you get started.
Multiple generations of a family laughing and eating dinner together.The Great Wealth Transfer — a term used to describe the handover of family wealth from the Silent Generation and baby boomers to Generation X, millennials, and Generation Z recipients — is set to become the most significant transfer of generational wealth in history. The process is accelerating quickly and, according to Forbes, by 2045 an estimated $84 trillion will have changed hands.

Many families are going through this process now, and some are feeling overwhelmed by planning and interpersonal challenges. The undertaking is vast, potentially involving asset transfers to family members and charities, assignment of business interests, creation of family offices, and a plethora of financial, tax, and investment planning efforts needed to make the process as efficient as possible. In addition to technical planning, there are many discussions to be had around family legacy and preparation of the next generation for responsible stewardship of wealth.

While many families dread the complications of wealth transfer, it can be a wonderful time for your family to come together, plan, and build a secure future for the generations to come. These five tips will help you prepare, ease the burden, and make the most of this historic opportunity.

1. Update your estate planning documents

The foundation of wealth transfer is your estate planning documents, and there’s nothing worse than a long, messy probate proceeding triggered by poorly structured or outdated documents. Know what estate planning documents you have, what they include, and revisit them regularly with your advisors to help ensure a fast, smooth estate settlement process that avoids unnecessary disputes and expense.

2. Include the entire family in the process

Families that are most successful at intergenerational wealth transfer start with a strong governance structure (another way of saying how you make decisions as a family) that includes the entire family. The process emphasizes transparency around the family’s wealth, sets clear expectations about money management, generates trust, and builds the knowledge and decision-making skills needed to further the family’s financial goals. If there’s a family business, family office, or private family foundation to consider, discussions must include expectations around roles and responsibilities of each family member, how they’ll contribute to the enterprise, and how decisions will be made cooperatively.

3. Prepare the next generation to continue the family legacy

It’s a beautiful thing to give wealth to your family, but if the next generation isn’t prepared to receive and manage it properly, the likelihood of success is diminished. Start early to build a strong foundation around the “what” and the “why” of your family legacy.

If the next generation isn’t prepared to receive and manage it properly, the likelihood of success is diminished.

The “what” addresses the knowledge and skills family members need to be thoughtful stewards of multigenerational wealth. This includes financial decision-making, managing risk, interpersonal communication, and proficiency at working together as a cohesive group. Education is an important first step, followed up by opportunities for each individual to start small and develop good behaviors over time. The earlier you start, the greater your chance of success.

The “why” addresses your family legacy — what your family stands for, its values, and how present and future generations will carry out your family mission and purpose. 

4. Consider the role of financial technology in managing the family balance sheet

Families need good access to financial information and reporting to support transparency and measure success toward their goals. Without strong, secure reporting, you’ll be unorganized and guessing where you are relative to your expectations. How does your family share sensitive information now? Do you know who has access to it? Is it being communicated, stored, and archived securely? Dealing with confidential information isn’t a particularly glamorous part of the great wealth transfer, but it’s a basic (and critical) consideration that’s necessary to keep a pulse on how you’re doing.

5. Make sure you have the right advisory team

Many of the frustrations associated with the great wealth transfer can be reduced by partnering with a cohesive and collaborative team experienced in estate planning and taxes, finance and investments, philanthropy, business transition, and technology. Your advisory team should have the right mix of experts to help accomplish long-term family enterprise goals that include the family business, philanthropy, management of your overall balance sheet, and family governance. Your advisors will be serving the entire family, so it’s important that the team includes individuals who can relate to the younger generations that aren’t just “my parents’ advisors.”

Your advisory team should have the right mix of experts to help accomplish long-term family enterprise goals.

Protecting family wealth starts today

Successful wealth transfer isn’t an afterthought or roll of the dice. It’s a deliberate process that starts with solid relationships, clearly articulated values, and the security of knowing where you came from. When done well, a generational transfer of wealth will help to ensure your family’s financial capital remains intact and your human, social, and reputational capital will also flourish. With the great wealth transfer upon us, now’s the time to ensure you’re prepared for what comes next. 

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