According to a recent study conducted by The Williams Group on over 3,250 families, “70% of intergenerational wealth transfers fail.” Their report defined “failure” to be situations wherein the heirs squandered the inherited wealth and assets. The majority of these failures stemmed from families whose heirs were not properly prepared for the responsibilities that came with their inheritance. The absence of open communication and trust among family members was the leading cause of the lack of post-transition success.
The families who underwent successful wealth transfers did so by involving their children and grandchildren in planning for their futures. The study highlights the importance of giving children the opportunity to practice for the future by assigning them minor roles in the family business, philanthropic works, or other ventures. Defining “a family mission as well as a strategy to attain it” was also noted as a key component for heirs to identify what their families’ goals are with respect to their wealth.
With frequent, open communication and proper transition planning, families can avoid situations where wealth becomes a source of friction and dispute and focus on using wealth as a tool for family unity and accomplishment. The full article (Wealth Transfers: How To Reverse The 70% Failure Rate) on this study can be viewed on the Forbes website.
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