Safeguarding Family Values While Managing Generational Wealth

March 29, 2023

When it comes to passing down intergenerational wealth, many families tend to mistakenly narrow their focus on the logistics—how they will transfer their assets with strategies like trusts, gifts, life insurance, etc… But there is so much more to it than just the “how.” What about the “why”?

Transferring generational wealth involves more than just the technical aspects of transferring assets from one generation to the next. It also requires preserving core family values and imparting wisdom to ensure the financial success of future generations.

Unfortunately, this facet of wealth transfer is often overlooked because it is—believe it or not—harder to navigate the transfer of values than the transfer of wealth. Family values, no matter how well-defined, come with history and emotions attached to them. These histories and emotions are unique to each individual and each generation within the family, which means there is more room for tension to arise when family values and generational wisdom are brought up.

Part of our job as family enterprise consultants, facilitators, and coaches is to make sure that values are at the forefront of the generational wealth transfer, despite the challenges that may arise.

While each family has their own unique set of values and preferred method of imparting those on the next generation, the road to raising careful stewards of generational wealth can be smoothed by keeping the following strategies in mind.

1. Teach Financial Literacy Early

Introduce financial concepts to your children as early as possible through age-appropriate lessons. Encourage them to learn from real-world situations and observe your own financial habits to develop a solid foundation for future decision-making.

2. Foster Open Communication

Encourage open conversations about money and your family’s wealth. Discuss the hard work and decisions involved in building and maintaining the wealth, and create an environment where children feel comfortable asking questions.

3. Make Learning Financial Topics a Positive Experience

Make learning financial habits a positive experience. As adults, we choose our actions based on what we know and have seen. We mimic that which we have positive feelings about, and shy away from the behaviors we have negative feelings about. If a child learns that money is stressful and encounters emotional friction whenever it is brought up, they will be less confident to take financial challenges head on and may even resort to avoiding it altogether.

4. Allow Room for Failure

Allow your children to make financial mistakes, but be there to support them in learning from them.  It may sound counterintuitive, but by supporting them in overcoming failures, you help them understand the importance of self-sufficiency and independence. Share your own stories of setbacks to teach them that everyone experiences challenges. It’s how we come back from those challenges that matters most.

5. Use Philanthropy to Connect

Incorporate philanthropy as a means to share core values and connect with your children on issues that matter to them. Involve them in charitable giving and decision-making processes to demonstrate the impact of wealth on promoting values. One great example of this is a family who gifts each of their children a set dollar amount of money around the holidays to donate to the charities of their choice. Each child must do their own research and present to the family why they have chosen each charity. The parents then make a point to deliver the gift in a way that provides positive feedback for the child doing the giving. It has become something their children look forward to each year as part of their holiday tradition, and is a great way to reinforce family values while encouraging children to also cement some of their own.

6. Encourage Individual Identities

One huge challenge for children of family-owned businesses is feeling independent and valuable outside their role in the family and the future of the family business. That is why it is so important to support the younger generation in pursuing their own interests and forging identities separate from the family business. Encourage opportunities where their association with the family enterprise is less visible and they feel they can stand on—and make a difference from—their own two feet.

7. Engage Third-Party Assistance

Intergenerational conversations about money and family values often get emotional. So many families find it helpful to bring in a neutral third-party facilitator, such as us, to help navigate sensitive conversations and mitigate conflict between generations.

These interactions can foster open communication and help develop a shared vision for the family’s future with the guardrails of the third-party built in. Regular meetings with a facilitator can also introduce younger generations to a team of family advisers, ensuring continuity and support for future wealth management. It also sends the message that they are an important part of the family whose input is valued and cherished. Not to mention the great opportunity it is to model the behaviors you would like your children to carry on in family meetings in your absence.

Could WillKate Family Enterprise Be the Right Fit for Your Family?

What’s unique about our approach at WillKate is that we support the entire human around change—financial or otherwise. As a family enterprise office and wealth management firm that understands the technical and human side, we have seen the challenge when the only focus is on the technical side of wealth.  The decisions made on the financial pieces only with little regard to the family as a whole—will put the larger picture at risk.  When improving and addressing the personal side, including personal feelings toward money, familial relationships, and the family dynamic that exists and the family culture will help to keep the big picture and vision in the forefront.

Traditionally, people don’t believe these two elements belong in the same box. We disagree because it’s the emotional and personal sides that steers the ship in decision-making. Our greatest client successes have resulted from incorporating both elements—the technical and the family —in what we do to help them each day.

When people walk away from our office, they really get the feeling that they’ve partnered with the right guide.

It takes more than money to build lasting wealth. With this approach, we’ve helped our clients and families create an extraordinary life for themselves and their family and provide for future generations with a purposeful plan. And that is what we do at WillKate.

If this is something you think would be helpful for you, please keep in touch and sign up for a free introductory call today. We can’t wait to speak with you.