Financial Planning

Preparing the Next Generation for Wealth – Steps for Success

Here are several ways you, working with an advisor, can help prepare them to manage your family inheritance.

Here are several ways you, working with an advisor, can help prepare them to manage your family inheritance.


Most of us don’t want to be reminded of our own mortality but putting off the conversation about what happens when you’re no longer around will not help anybody. Yet, this a common failing. So many people don’t discover a life-changing life insurance policy until they’re cleaning out their loved one’s bottom desk drawer. Share as much information as possible. It might not be an easy conversation but in the long run it will leave your family better prepared and minimize the risk of poor decisions during an emotionally challenging time.

The same rule applies to estate planning strategies. The last thing you want to do is land your heirs with a whopping tax bill or the costs involved in transferring a family business. An advisor can help educate the next generation on strategies like estate freezing or other ways to minimize capital gains or explain how a life insurance policy can help pay bills.

Family goals

Getting the family round a table is not only important to share information and explain strategies but it’s also vital to establish something more intangible – shared goals and sense of purpose. What does the family believe in? What’s its vision for the future? Despite the endless media coverage of the markets and returns, most of the time this does not involve beating the S&P 500 or racking up a minimum 12% annual returns.

Instead, this might involve recognizing family history, understanding the origins of its wealth or respecting certain personal relationships. Some families, of course, have religious or cultural values and/or philanthropic areas it wants to continue to be involved in. There are also more prosaic goals like maintaining a certain standard of living or ensuring education costs for the grandchildren are taken care of.

Every family will have a different philosophy on wealth and there is no right or wrong answer. However, it’s important everyone is on the same page to ensure future decisions stay true to these values.

Show some gratitude

Wealth can shelter young people from critical life lessons and perspectives, which can give rise to a dangerous sense of entitlement. Teaching heirs the value of money, how to save and budget, and the skills and independence needed to contribute to society is important. There are many ways to do this, and each family will have a different approach, but encouraging your kids to earn their own money, pay for their own education or save for their gap year travelling, for example, can help instil these values and ensure family money is not taken for granted.

Many successful business leaders require their children to learn the ropes from the bottom up at the company, while others want to see they can “make it” in another profession, not only to teach self-sufficiency but also to show them how fortunate they are. Not every family will be able to do this, of course, but finding way to teach old-fashioned values like hard work and the value of money, married with an understanding they are also stewards, not owners, of their family’s wealth, can help engender a priceless sense of gratitude.

Learn failure

All the above are designed to engage the next generation and prepare them for managing money. As Tom McCullough, CEO of Northwood Family Office in Toronto, Ontario, says, families who prepare the heirs for the money and the money for the heirs will stand a better chance of success. A big part of being able to handle wealth with grace and gratitude is by understanding the sacrifices that went into getting it in the first place. Real-life experience is, therefore, vital. Younger family members can work with an advisor to manage their money and join an investment committee, for example. Let them make portfolio choices so they know what it’s like to lose. Encourage a business venture - let them experience the trials and tribulations that involves. Failure is a part of life and will help them grow into a mature adult and a more responsible steward of wealth.

Sound estate and financial plans are paramount, of course, but the third leg of the wealth transfer – what the Rothschilds call Heritage Design – can make or break a family’s wealth transfer. Invest time in preparing and educating your heirs about family values and goals so when the time comes, they aren’t blindsided when wealth is under their control.

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