Is your spouse and/or Adult Children prepared and ready to inherit? Do you want 70% of your wealth to disappear due to poor decisions
The world’s largest transferral of wealth is approaching the surviving spouse and the second generation.
The surviving spouse in most cases are women which means most of the worlds’ wealth transfer is set to pass to women!
They have a different view of money, investments and the family legacy of such. Preparation for money decisions, the use of a Power of Attorney and the role of an Executor of an Estate requires guidance and education for this future role.
The statistics for inter-generational money transfer decisions are not good. The record indicates that the second generation will on average lose 70% of their inherited money. Is this because they have not been given good money skills and experience? Is this because they have not sacrificed and worked as hard as their previous generations? Possibly it is a combination of these and other factors. The transfer of knowledge and experience to save money and build wealth comes with time, pain, trial and error. Your descendants and human nature do not appreciate wealth or worldly money experience if things come TOO easily.
Here is a good example of this….
A forty-year old son was going through a divorce, so his parents allowed him to live in their rental unit at $40 per week until he got back on his feet. Fifteen years later the son was still paying rent at $40 per week and the parents could barely make ends meet in retirement. Some might argue this is financial abuse of the parents. (This is another rising issue but not for this article). Regardless it is a contributing factor to the second-generation statistic of not being able to retain the inherited wealth.
The third generation has an even worse statistic of losing 90% of their inherited wealth!
So, what can you do? Start your children young on their own little budget of spending against their regular allowance for set jobs and responsibilities within the home. They need to know that what money goes out needs to be less that the money they ‘earn’ in order to save. This is how they can accumulate the special things they want. Satisfaction and positive reward come with this achievement regardless of the age of the individual. Adult children need to be guided and engaged in money decisions which involve increasing amounts of money. The principal is the same no matter how many zeros after the dollar amount! The difference is the risk of them not knowing how to make good money decisions is far greater as the amount of a future inheritance grows.
We encourage our clients to involve their adult children or future beneficiaries in money discussions. It is very important to educate on money and investment choices available, to learn about the tax treatment of investments which can influence decisions and the timing of money decisions. We care. The best gift you can give your children is to ensure they have the skills and professional guidance to make smart and informed money decisions.