Giving money away can actually help you save it for future generations. No, I’m not speaking of some secret tax loophole, but about the enduring value of family philanthropy. Research has shown that 70% of wealthy families will lose their wealth by the second generation. You would think that careful investment and estate planning is paramount to preventing this. Experts agree, however, that to ensure wealth continues to successive generations, it is essential to build bonds among family members that go beyond a focus on money. One such way is to connect family members around a common purpose or cause.
Communication & Understanding Is Critical
Families that communicate often and work and play together are much more likely to preserve the family wealth. Engaging in philanthropy rallies families around causes that reflect what they care about. In the process, it fosters communication as family members learn and appreciate each other’s motivations surrounding money and giving. Exploring historical family values and determining direction for the future builds cohesiveness among members. Practicing philanthropy can provide early experience with properly handling money for children and young adults. So how can you get started?
Time-Tested: Seven of My Insider Tips to Preserve Family Wealth
Helping families create cohesiveness around wealth is one of my very favorite things to do. If preserving wealth for future generations is important to you, here are some of my suggestions:
- Take stock of the family history—find an ongoing theme that reflects the family values.
- Engage in communication surrounding causes and values that are important to each other.
- Talk about what kind of family heritage they would like to leave for future generations
- Prepare a common list of family values.
- Write a family mission statement that reflects those values and how the family heritage can contribute to promoting favorite social, faith, and/or community causes.
- Give children and young adults a great lesson in handling money while benefiting others with seed money to invest in causes they care about.
- Meet often to follow up on progress and to continue communication around these themes.
While many of you might be in agreement with the value of such a family encounter, you might feel awkward in getting started. Please don’t put off this important activity! Begin now to create a family heritage that will help to ensure your wealth benefits the people and causes you deeply care about. I would love to discuss with you how I can help set up such a family meeting and coach you through it.
Important Disclosures: The information provided here is of a general nature and is not intended to answer any individual’s financial questions. Do not rely on information presented herein to address your individual financial concerns. Your receipt of information from this material does not create a client relationship and the financial privileges inherent therein. If you have a financial question, you should consult an experienced financial advisor. Moreover, the hiring of a financial advisor is an important decision that should not be based solely upon blogs, articles, or advertisements. Before you hire a financial advisor, you should request information about the financial advisor’s qualifications and experiences. Past performance is no guarantee of future results. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Examples provided are for illustrative (or “informational”) purposes only and not intended to be reflective of results you can expect to achieve. Judy Hulsey (“Judy”) works with Allgen Financial Advisors, Inc. (“Allgen”), which is an investment advisor registered with the SEC. Neither Judy nor Allgen provide personal financial advice via this material. The purpose of this material is limited to the dissemination of general information regarding the services offered by Judy and Allgen. It is not intended to be a solicitation or offer to sell investment advisory services to residents of any state in which Allgen is not currently authorized to do so. The Disclosure Brochure, Form ADV Part II, which details the business practices, services offered, and related fees of Allgen, is available upon request.