Wealth That Stays for Generations

You work hard throughout your life to secure a future for the next generation. But the unpleasant reality is that wealth transfer often fails within three generations. According to a study by the Williams Group, approximately 70% of families have lost control of their assets by the third generation. That’s true across the world, independent of culture and tax law. But it’s a fate that can be avoided with careful planning and a thoughtful approach to preparing the next generation.

Why does estate planning tend to fail by the third generation? Part of the problem comes when heirs are unprepared for the lifestyle changes that accompany wealth. But far more often, the issue stems from poor communication, a lack of trust, and planning from a place of emotion rather than strategy.

Why Most Wealth Transfers Fail

Estate planning is a matter of money management, of course. But it’s more importantly about relationships. This human element is what poses the greatest challenge.

Families often assume that a well-crafted estate plan and the right legal structures are sufficient. But without open and honest communication, even the best-laid plans can unravel.

Many families avoid talking about money, whether due to cultural norms, a desire to keep heirs humble, or simply because the conversation feels uncomfortable. But keeping wealth a secret can do more harm than good, leaving heirs unprepared and vulnerable to financial missteps.

Another reason that wealth transfer might fail is the emotional and psychological impact of sudden wealth, otherwise known as the “Sudden Wealth Syndrome.” That’s the reason people who win the lottery often lose the money or make reckless financial decisions. Sudden, unexpected windfalls can impact a person’s sense of self and identity, and unprepared inheritors may struggle to make wise choices or fall victim to those seeking to take advantage of their newfound fortune.

Blended families can add another layer of complexity, as different heirs may have conflicting expectations about what’s fair. And, of course, not every heir is equally equipped to handle wealth responsibly. One might be a savvy investor, while another may have a history of poor financial decisions or even struggle with addiction or mental health issues that would make inheritance more complex.

Without proper planning, these complexities can evolve into resentment, legal disputes, or even financial ruin.

Preparing Heirs for Wealth

When it comes to estate planning, we advocate for a “love them equally, but treat them uniquely” approach. This means understanding the specific needs of your family, and making a plan that takes reality into account. Equal distribution isn’t always fair, and fairness doesn’t always mean splitting assets into identical portions.

Perhaps your daughter is well-suited to managing the family business, but your son might balk at the same opportunity. Perhaps a grandchild is better suited to receiving a structured financial plan, like a trust that provides a steady income stream rather than a lump sum distribution. Maybe one child has carried heavier burdens of caretaking in your golden years, and you want to compensate them for that time. Thoughtful planning ensures that each heir receives what makes the most sense for their abilities, financial knowledge, and personal goals.

However you decide to divide your assets, the key is to communicate early and often. If you wait too long, your heirs may be left fumbling with a massive surprise later in life—one they’re not prepared to handle. By easing into the conversation, you give them time to understand, ask questions, and become familiar with your hopes and vision for the future.

You’ll also want to include the whole family in these discussions. Spouses and in-laws bring their own expectations and financial philosophies to the table, and their input will have an effect on your kids. Understanding this, accepting it, and giving them a seat at the table for these discussions can help smooth over problems later. Estate planning can be as much about preserving family harmony as about preserving wealth.

Focus on Values, Not Just Money

The most valuable thing you have to pass down isn’t your wealth. It’s your wisdom, knowledge, and values you pay forward to future generations. Money can be lost, spent, or mismanaged, but the lessons you teach about financial stewardship, responsibility, and generosity can last for generations.

One of the most effective ways to instill these values is through charitable giving. By incorporating philanthropy into your estate plan—whether through a donor-advised fund, charitable trust, or direct donation—you not only optimize wealth distribution and tax planning, you also set an example of generosity for your heirs.

Working closely with a financial planner can help ensure your wealth is managed wisely. Estate planning isn’t one-size-fits-all, and the right strategy depends on your unique circumstances. A professional can help you navigate tax-efficient wealth transfer strategies, family business succession, trust structures, or even set up a corporate trustee to help minimize friction among heirs.

The goal is to create a plan that respects your assets, values, and the legacy you wish to leave behind.

This material is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult a qualified professional for guidance tailored to your personal situation. Tax implications vary based on your individual circumstances. Strategies should be evaluated in coordination with your tax advisor.