“A life of luxury sounds nice, but generational wealth sounds better.” (Unknown)
As the old adage goes: “The first generation creates wealth, the second generation preserves wealth, and the third generation squanders it!” Our goal is to prevent this.
If you’re fortunate enough to have created generational wealth, it’s extremely important that your heirs know about your hopes for the future use of your wealth. The conversation doesn’t need to feel as if you’re walking on eggshells. In fact, these chats can actually be fantastic opportunities to strengthen family connections, protect your money value system, honour the creation of wealth and pave the way forward for your family’s future financial security.
The very basics
Your heirs must know where you’ve filed your Last Will and Testament, Power of Attorney, and Living Will. (Your doctor should also have the latter on file.) Deceased estates can take a long time to finalise, so make a plan for your family to have access to funds in the interim – life policies, family trusts, and separate bank accounts are common recommendations.
Essential elements of a winning family constitution
Turning tough talks into lasting legacies doesn’t have to involve developing a family constitution. You could choose to have ongoing family meetings without any documentation. The principles could be included in your letter of wishes. But family constitutions can help to formalise your hopes regarding the wealth you have created.
If you decide to document your wishes, a family constitution should ideally outline the principles, roles, and guidelines for managing and passing down family assets. It’s all about providing a harmonious script to avoid the breakdown of family relationships.
Some of the recommended elements include:
- The history of your career, which will assist in celebrating your hard work (and explaining how you built your estate).
- A mission statement. Core values could include prudent spending, encouraging continued education, and gifting rules.
- Measurable goals can be set for wealth preservation.
- Give roles and responsibilities of each heir, making sure that they align with their respective skillsets.
- Manners of empowering the next generation.
- Family council rules to assist in making decisions regarding joint assets such as a holiday house.
Mastering the journey ahead
Developing a family constitution (or even just discussing your legacy plan) often starts with a group meeting with your advisor and a facilitator, a professional who is skilled in managing group dynamics and ensuring everyone’s voice is heard. The facilitator helps to smooth the way ahead and ensures that the conversation is productive. You may wish to share your Last Will and Testament at this meeting. The conversation should open the door for everyone and preferably be held in a ‘safe place’, such as a home rather than a boardroom.
After signing a confidentiality agreement, the facilitator could host individual meetings with heirs. Heirs may wish to express concerns about their inheritance confidentially, which they prefer not to share with the whole family. The facilitator could then draft a report to be shared with the wealth founder.
All the conversations should preferably balance the heart and the head and acknowledge emotions with empathy.
The early bird catches the worm
Remember to start the process early so that the constitution can be changed annually according to changes in circumstances. These may include revised priorities, the voices of additional heirs, changes in wealth, businesses, or family dynamics. Early planning is key to staying ahead and being prepared for any changes.
Involvement is the magic ingredient
The process works very well if it reflects everyone’s voice. Working together collaboratively ensures the document is respected and relevant, fostering a sense of unity and shared purpose within the family.
From tough talks to family triumphs
As your financial advisors, we can start the process and consult with the facilitator. We can also broach the topic with your heirs if you prefer not to be the first to bring it up.
Remember: when families steer the ship together, they strengthen the ties that bind and create legacies worth celebrating.
Contact us if you want us to assist you and your family in preserving generational wealth.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
© FinDotNews