“Always understand that wealth isn’t something you possess, but a flow which has found a temporary parking place under your stewardship.
Eventually this stewardship will move to others as all things must pass (including you)” -Emperor Magazine
For wealth to be preserved, it must pass from one generation to the next smoothly and with minimum loss. It is also incumbent on each successive generation not only to preserve wealth but also to enhance it.
There are several important aspects to transfer of wealth that we shall examine in succeeding paragraphs.
Financial Education of Loved Ones
A person who works hard, creates wealth values and preserves it is better than those who inherit it without much effort. For this reason alone, financial education of children becomes paramount. It is not only important to send children to the best colleges and universities but to also educate them on financial matters from a very young age. They must be groomed into business and investing because this education is not readily available in schools. It is important to pass experience and wisdom through practical application by family members who have created wealth and have the experience of managing it.
Rockefellers have managed, not only to build enormous wealth but also, to sustain it through multiple generations in large part because of sustained financial education of younger family members. Rockefeller use to give each of his young children an allowance of 25 cents to teach them how to handle money.
If they wanted more money, they had to earn it by working. The children were required to account for the money they were given. This is a great example of practical lessons we need to pass to our children to create sustainable wealth.
If a family does not have adequate experience then children should be sent to attend investment seminars and made to interact with professionals like financial advisers, tax professionals and lawyers.
There is nothing more fascinating than stories; tell your children how their grandpa rolled up his sleeves and through sheer hard work and persistence lay the foundation of family wealth they now enjoy! This will excite and inspire them to emulate their family heroes.
If you do not have any in your family, read them stories of other wealth creators with whom they can relate. Teach them about delayed gratification and what stewardship of wealth for greater good means. Proper handling of wealth is a great responsibility. It can be put to great use if handled correctly but can be a destructive force when given to people with untrained minds.
Strategic Joint Decisions
“Families that share and learn together tend to work well together, growing their financial, intellectual and social capital.” – James Hughes
Every new generation will have new ideas about money and what values they attach to it. They will have their views on how best it can be grown and used to enhance their lives and those around them. You may not always agree with your kids but it is important to give them chance to participate in family decisions that have impact on their lives.
Such discussions are essential not only for the education value but also promotes openness, trust and brings harmony within a family. It leads to better understanding of family values and teaches conflict resolution skills.
Avoiding conversation regarding money matters as they are sensitive is one of the most common mistakes in family. You can not reveal everything to a young child and burden them with information that they are not prepared to process. As they grow, the level of their participation can be increased gradually.
Your bank balance and accumulation of assets accounts to nothing if you do not properly prepare the next generation to handle money. Your true wealth lies in collective human and intellectual capital within a family.
Children must be given the opportunity to solve their financial problems. Even if you have the money, do not bail them out just to show your care and concern. Once children learn to solve their problems, they will have the tools to succeed in life.
Make a Will
A will is also important for smooth transfer of assets to your loved ones. In absence of a will, there will be lack of clarity that can result in ugly and very expensive legal fights within family members, which will result in dilution of your wealth.
Drafting a will is a very responsible thing to do to preserve your financial legacy. The best part is that it does not take much money to do so. A good lawyer will charge you only a few hundred dollars to make a will.
These days there are online services that allow you to make a will. Online wills are suitable when wealth tax is not involved. In case of complex holdings, it is wise to get a lawyer to draw out the will. Online Will costs are much lesser than using services of a lawyer. In addition, you can do this within half an hour or so sitting in comfort of your home.
The software used in creating the will in most cases is very user friendly. It will ask you a few questions and your responses will create a final will document. It is also easy to revise your wills online. Wills are living documents! You will need to revisit them time and again as your circumstances change with marriages, divorces, new births or deaths in your family.
Online wills are normally filed with local probate court and will become public document. If privacy is concern to you then use a lawyer or a living trust.
Caution – One important thing to check about your will is how much it will cost to execute the will. Some services are free upfront but will cost you substantial amount of money at the time of execution of the will. In some cases, they take a percentage of the estate. It is always wise to read terms of service before making a will whether online or through a lawyer.
Once the will is made, you should make several copies and keep them in a safe place. A copy should be given to executor of your will or at least he should know where to find the will. Executor can be your lawyer or an impartial member of your family whom you can trust.