By Brad Scott, Founder, EWM Group, Brisbane, Australia
However, the new managers have no understanding of the company’s products, goals, history, values or mission. They have no experience in the field, let alone a basic knowledge of day-to-day business functions. There is great likelihood a company will not succeed under these conditions, and realistically, you would never trust these individuals with even one dollar of your hard-earned wealth. Unfortunately, this is exactly what you are doing with your estate if you do not take the necessary steps to prepare your family for the responsibilities that lie ahead.
But… like other parents you are naturally worried about the impact that telling your kids about your wealth will have on them.
· Will they be treated differently by society? Will others take advantage of them?
· Will having access to money lessen their motivation and their desire to work?
· Will they consume the wealth in wasteful ways or make poor investment decisions?
· Will they have nothing left to pass on for their own children and grandchildren?
· Do my children have a sense of entitlement, or are they completely disengaged from the topic?
Research from the Unites States indicates that 70% of families fail to successfully pass their wealth on to the next generation. Studies show that the primary causes relate to reasons other than investment performance or poor estate planning. 95% of the time the reason for these failures is due to either, a lack of communication and/or trust within a family, a lack of a clear vision or purpose of wealth, or simply family members not prepared for the responsibilities that are bestowed upon them.
Remember, the solution is more than your will. The will simply directs the assets in the event of your passing. Historically, we have all spent time preparing assets for the next generation, but how much time have we spent preparing the next generation for the assets and responsibilities?
We are at the beginning of one of the largest wealth transfer events in history with over $40 trillion of wealth in the United States alone passing from one generation to the next over the few decades. In Australia, albeit relative, the numbers are no less significant. Therefore, with your hard eared wealth likely to transfer to the next generation over the next few decades and noting that 70% of wealth transfer events fail and 95% of the reason they fail are avoidable, isn’t it worth spending some time and effort in addressing this situation?
About the author: Brad Scott is a member of Institute for Preparing Heirs, having completed the Institute's hallmark advisor training program, The Great Wealth Transfer: Engaging & Retaining Generational Families.
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