You have developed all of your estate plan documents — your will, trust, letter to heirs, living will, and etc. So now you are all set, right? Probably wrong, at least if your plan includes keeping the wealth in your family for more than one generation. A key to success in keeping wealth in a family for multiple generations is preparing the heirs. Here are five ways to prepare your heir to inherit your estate.
If your family can agree on a value system and develop a long term plan to keep the family value system and the family wealth intact, your heirs will understand the whys behind the actions and be involved in the wealth strategy — thus more apt to continue to follow the plan and keep the wealth.
Mark Haynes Daniell in Strategy for the Wealthy Family defines 7 principles to hold onto wealth for generations. In three of the principles, he discusses the below recommendations:
By reinforcing the uniqueness of the family through sharing family history, family stories and through frequent communication opportunities, family members learn how to act out their roles in the long-term family plan. This reduces the possibility of argument and wealth-destroying controversy.
Roy Williams and Vic Preisser discuss, in Preparing Heirs, the basic premise that most estate transfer failures are due to a breakdown in family trust and communication, causing the heirs to diverge from the long-term family wealth plan.
Thayer Cheatham Willis (a counselor and an inheritor) in Navigating the Dark Side of Wealth notes the importance which formal education has in exposing your heir to the wider world of ideas; and the importance of teaching your heir about finances in general as well as the family finances in increments that are age-appropriate for the heir.
Engage heirs with your circle of advisors.
Build structures that allow peer-level engagement in family matters among all heirs to facilitate practicing family roles and gaining leadership skills.
Assist heirs in finding relevant internships or employment to facilitate learning activities.
Counselor, Thayer Cheatham Willis; Financial Advisor, Mark Haynes Daniell; and Lawyer, James E.
Hughes all stress the need for the heir to experience the full range of life challenges. Allow your heir to take on opportunities, overcome obstacles and experience the consequences of their actions. By doing so, you encourage the building of your heir’s self-esteem and life skills.
Let your heir take on a job, start their own company, live on their own without your support.
Give the ‘gift of want’. According to Troy Dunn in Young Bucks – How to Raise a Future Millionaire – this teaches your heir to think about how to get what they want and shows them they can do it.