Does the old adage it takes 1-2 generations to make money and 2-3 to lose it hold true? Since most of us are aware of it, it must be rooted in enough experience and examples to persist. And what perpetuates this tragedy? I would submit that the family slips into comfort and eases off doing the work first so that it can play.
According to our oft-cited Kurt Supe CPA on X, “A 20-year study by the Williams Group tracked 3,200 wealthy families. By the second generation, 70% had lost the money. By the third, 90%.” OK, so the data seems to back the thesis.
But we cannot stop there, we must ask why. Mr Supe has a theory that resonates with our experience, “Roughly 6 in 10 of the failures came down to one thing. The family stopped trusting each other and stopped talking. Unprepared heirs. Secrets. A will nobody understood. A plan that protected the assets and ignored the people.”
Without proper planning, paperwork, and process, there will not be a Great Wealth Transfer, only a Great Probate. But if the planning does not include the family and does not prepare the Next Generation to understand what is about to happen / happening, how are they going to use the advantage of an inheritance to further improve the family legacy?
We can have these conversations at the kitchen table, over the hospital bed, or at the funeral home. It’s our choice. We can prioritize the family legacy, treat the business of the family as a business, and ensure that the Next Generation are given a better life than we were.
Mr Supe put a fine point on it, “You can do everything right with the money and still hand your kids a disaster, if you never did the human part. The families whose kids actually thank them aren't the ones with the cleverest tax move. They're the ones who had the hard conversation early.”
We can have better family communication. We can plan, share, execute, and optimize the family wealth. We can ensure siblings aren’t suing each other over money they didn’t earn. We can help ourselves be organized, lead from the front, and help the Next Generation. We can move our families forward…