According to an ancient Chinese proverb, “Wealth does not pass three generations” -- the first generation builds the wealth; the second generation is inspired to preserve it by witnessing the hard work of their parents; and the third generation, having never witnessed the work that went into the creation of this wealth, squanders it.
We are perhaps even more pessimistic than the ancient Chinese -- our experience shows that wealth is usually gone before the third generation ever sees
Corporations issue “mission statements” which usually include fashionable buzzwords like “leveraging” and “synergy.” A family with significant assets should do the same, with input from all of the adult members of the family. What makes you proud to be a member of your family? What makes your offspring proud? A family mission statement should be dynamic and fluid (subject to change), and it should allow every adult member of the family to contribute.
A family mission statement should be simple enough for everyone to understand, but it should incorporate some level of detail. It should also transcend purely material considerations and be realistic. “Make enough money to buy Alaska” is probably not going to be an effective mission statement, for example. Are there any causes, such as environmentalism or medical research, that are important to family members? A family mission statement should address everyone’s concerns.
History bears witness to the fact that a vast family fortune amassed by one generation carries with it two distinct dangers – (i) disincentivizing subsequent generations who see no need to work (the “spoiled rich kid” syndrome) and (ii) family disharmony after the death of an elder as family members fight over the inheritance.
Regular communication can help head off these dangers, as can clear expectations that apply to every family member. Hold regular family meetings to explain the family wealth preservation and enhancement strategy, clarify goals and outline each family member’s responsibilities.
The preservation and enhancement of family wealth
Most people realize that their true best interests transcend their lifespan. Forward-thinking people, however, possess the vision to look three and even four generations ahead of their own lifetimes. If you need assistance with wealth planning of any sort, call us today at 301-468-3220, or fill out our online contact page, to schedule a consultation.