When it comes to wealth, many families spend a lot of time and energy building it, but far less focus on how it will be passed to the next generation. <\/p>\n\n\n\n
Statistics show a majority of high net worth families fail to successfully transfer assets from one generation to the next, resulting in not only a loss of control of those assets, but a loss of family harmony. <\/p>\n\n\n\n
Lack of trust and communication are to blame, as well as unprepared heirs and a lack of an agreed upon mission for the family wealth, says Roy Williams, founder and president of The Williams Group and co-author of <\/span>Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values<\/em>.<\/p>\n\n\n\n Traditionally, the emphasis on wealth transfer has been placed on the assets, when Williams says more attention should be placed on establishing and maintaining family values.<\/p>\n\n\n\n \u201cThe values we have determine the actions we take or don\u2019t take,\u201d says Williams.<\/p>\n\n\n\n Family values may include spiritual, intellectual, psychological, physical and financial issues.<\/p>\n\n\n\n Williams says families need to work together to establish what\u2019s important to them, both individually and as a team, and use those values act as a compass for decisions impacting the family.<\/p>\n\n\n\n \u201cWhen you start building the family as a team \u2013 with roles and performance standards \u2013 then all of this mystery, the dogma, the entitlement, the affluenza stops becoming a factor,\u201d Williams says.<\/p>\n\n\n\n He says families must also continuously talk through inevitable disagreements around values and distribution of assets, to build communication and trust.<\/p>\n\n\n\n \u201cYou may have the best-laid estate plans in the world, but if they are laying on top of a shaky foundation of family dynamics, then they are destined to fail,\u201d Williams says.<\/p>\n\n\n\n Most parents know the conversation about wealth transfer needs to happen: The question is when to start.<\/p>\n\n\n\n Parents are understandably concerned about disclosing the level of their wealth when their children are young, worried it will prevent them from pursuing their own personal and professional development.<\/p>\n\n\n\n \u201cThere\u2019s a concern they just won\u2019t try as hard or make smart choices to be successful,\u201d says Leanne Kaufman, head of RBC Royal Trust, RBC Wealth Management.<\/p>\n\n\n\n It could also encourage some children to make ill-advised, maybe even life-changing decisions.<\/p>\n\n\n\n \u201cWe see a lot of families where individuals have relied too heavily on knowing that the funds are there to bail them out,\u201d Kaufman says of inheritors.<\/p>\n\n\n\n Parents hoping to avoid affluenza among their children can begin by teaching them about money at a young age, starting with a modest allowance, says Judi Cunningham, a family enterprise advisor, educator and speaker, and founder of the Vancouver-based Institute of Family Enterprise Advisors.<\/p>\n\n\n\n She recommends parents not only talk about how their kids can spend the money, but also save it and give some away to charities. The conversation should focus on why each action is being taken, and their pros and cons, Cunningham says.<\/p>\n\n\n\n \u201cOften I think families think that kids aren\u2019t sophisticated enough to understand some of these concepts,\u201d says Cunningham.<\/p>\n\n\n\n \u201cYou can have meaningful conversations about money with children at a young age. Those conversations plant the seeds to provide the foundation for creating meaning so that, when wealth is transferred, it\u2019s a completely different experience for a family. They understand how they want to live and money becomes the tool for them.\u201d<\/p>\n\n\n\n It\u2019s not having the conversations at all that can cause assets to be mishandled and lead to family strife when it comes time to pass along the wealth.<\/p>\n\n\n\n Too often, Cunningham says parents believe the contents of an estate, which includes money and personal assets, should be kept a secret until they pass away. The problem arises when heirs are read the last will and testament and don\u2019t understand why a sibling or another relative received something perceived to be more valuable \u2013 financially or emotionally.<\/p>\n\n\n\n Cunningham says most parents try to treat each of their children equally, but that doesn\u2019t always come across to their kids depending on the type of assets being dispersed.<\/p>\n\n\n\n \u201cPeople are fighting over their upset of the meaning they\u2019ve place around these items,\u201d says Cunningham. \u201cThis usually happens when families don\u2019t have the conversation. They don\u2019t discuss the meaning.\u201d<\/p>\n\n\n\n This can include everything from a family heirloom to a piece of property or investments.<\/p>\n\n\n\n \u201cParents aren\u2019t putting their love into the money or the stuff, but it\u2019s how people feel,\u201d Cunningham says.<\/p>\n\n\n\n She says many families spend a lot of time earning and accumulating wealth, but not enough time preparing their kids for how to manage it later in life.<\/p>\n\n\n\n \u201cWhen it\u2019s a sudden thing; that is how wealth gets squandered,\u201d says Cunningham. \u201cIf you transfer money and there is no development of human and intellectual capital \u2026 that\u2019s when the problems arise.\u201d<\/p>\n\n\n\n Most families benefit from the guidance and advice of third-party advisors, who have the financial expertise and outside perspective to help steer the conversation.<\/p>\n\n\n\n \u201cOne of the most important things a financial advisor can do is talk to families about who they are and what\u2019s important to them,\u201d says Cunningham. \u201cWhat do they want to do with their money and what\u2019s it for?\u201d<\/p>\n\n\n\n A third-party financial advisor can also speak from experience based on their work with other families, says Kaufman of RBC.<\/p>\n\n\n\n Advisors also have financial planning skills and asset management acumen that can help guide the financial decisions being made from one generation to the next.<\/p>\n\n\n\n \u201cThese advisors are not just looking at one piece of a family\u2019s pie,\u201d Kaufman says. \u201cThey really try to get a full picture by understanding what all the components are around the estate, the family business [where applicable] and the family dynamics. That involves pulling in the relevant family members and the next generation so there is a lot of transparency. That helps to make the transfer so much easier.\u201d<\/p>\n\n\n\n Kaufman is a firm believer in having advisors host regular family meetings to help facilitate and\/or mediate conversations about the wealth that will eventually be transferred.<\/p>\n\n\n\n \u201cWe\u2019ve certainly seen success with it,\u201d she says. \u201cEven if it\u2019s something as simple as handling the family cottage: Don\u2019t make the assumption everyone knows how you want things to be handled. Have a meeting, and we\u2019ll help you.\u201d<\/p>\n\n\n\n Kaufman says the financial services industry can also do a better job of helping clients understand the importance of talking about wealth, and starting the conversation early.<\/p>\n\n\n\n \u201cAs advisors we need to figure out how to make it easy for the clients to engage us in that role, because we cannot assume it\u2019s something they\u2019re going to ask for,\u201d she says.<\/p>\n\n\n\n \u201cWe need to make them aware and then help demonstrate to them how it could be facilitated given their own family situation. I don\u2019t think most Canadian families, even with modest family net wealth that will be passed on, have really talked about what is it they intend to achieve as a family.\u201d<\/p>\n\n\n\n Having this conversation today will benefit all family members, from each generation, well in the future.<\/p>\n","protected":false},"excerpt":{"rendered":" When it comes to wealth, many families spend a lot of time and energy building it, but far less focus on how it will be passed to the next generation.<\/p>\n","protected":false},"author":50,"featured_media":16561,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"rbcwm_post_date":"2016-02-18 00:00:00.0","editor_notices":[],"rbc_url_alias":"","rbcwm_featured_desktop_image_position":"","rbcwm_featured_mobile_image_position":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[239],"tags":[750,749,734,751,273],"rbcwm_content_owner":[609],"rbcwm_need":[68,84],"rbcwm_segment":[66],"rbcwm_solution":[],"rbcwm_topic":[94],"rbcwm_channel":[],"rbcwm_format":[],"class_list":["post-3611","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth-transfer","tag-asset-transfer","tag-passing-on-wealth-to-the-next-generation","tag-planning","tag-sudden-wealth","tag-wealth-transfer","rbcwm_content_owner-royal-trust","rbcwm_need-grow","rbcwm_need-protect","rbcwm_segment-individuals-and-families","rbcwm_topic-your-wealth"],"acf":{"rbcwm_subtitle":"Most parents know the conversation about wealth transfer needs to happen: The question is when to start and what should be discussed.","rbcwm_post_author":"","rbcwm_custom_breadcrumb_text":"","rbcwm_custom_breadcrumb_link_url":"","rbcwm_disclaimers":{"add_disclosures":"","perspective_disclaimer":"","expandable":"","omit_from_pages":[],"disclaimer_footnote":""},"rbcwm_insight_cta_id":[11937],"rbcwm_pagination":{"next_link":"","next_link_text":"","previous_link":"","previous_link_text":""},"rbcwm_video_duration":"","article_time":"","rbcwm_enable_toc":false,"rbcwm_toc_selector":"h2"},"yoast_head":"\nThe importance of family values<\/h4>\n\n\n\n
When to start the discussion<\/h4>\n\n\n\n
Sudden wealth is often squandered<\/h4>\n\n\n\n
Professionals can help steer the conversation<\/h4>\n\n\n\n