The season of summer brings with it a world of change. The days become longer and lighter, trees bear fruit, and flowers continue to bloom in a myriad of colours.
Summer also brings a time of change for families. With school holidays and university students returning home for the summer, the season is a time to reunite and spend quality time together as a family.
In this way, summer gifts families the luxury of time. Time to catch up, time to create new memories, and time to discuss the future. Many families find the latter a difficult subject to broach, but it’s an incredibly important conversation to have.
Significant inheritance and intergenerational wealth transfer is one of the most poignant milestones for a family, so it’s imperative to plan carefully to ensure the transition is positive for everyone involved.
So, how can families begin this conversation this summer, and ensure the next generation are prepared for wealth transfer?
Begin the conversation early
Our formal education system currently offers little to no financial education. As such, we’re raising a generation who are, for the most part, unprepared for managing significant wealth.
Parents have a pivotal role to play in beginning this education – so that when the time comes for their children to inherit wealth, it’s a positive responsibility rather than a burden. The summer holidays provide a perfect opportunity to begin this education.
Being prepared for this huge transition gradually will help set your children up for success, rather than stress. Simply put, it’s better to start talking about inheritance “too much, too soon”, and not leave it “too little, too late.”
Tell your family’s story
Take some time over the summer holidays to sit them down and explain how your family’s wealth was created, and how it’s evolved over time. By bringing them into the story and making them feel a part of the journey, they’ll develop a deeper understanding and appreciation for this wealth – so that when the time comes, they recognise the role they play in nurturing the family wealth through control stewardship.
Starting the conversation in this way also helps erode communication barriers on what is still a delicate subject for many families. As much as parents can struggle to start the conversation about inheritance, children can struggle too. They may feel fearful of coming across as entitled by asking how much they can expect to inherit.
By discussing the past and present, talking about the future becomes a natural stepping stone.
Ask about their ambitions
For our younger generations, summer is often a time to take stock before returning to education in September, and to consider plans for the future.
This presents the perfect time to talk to your children about their ambitions and hopes for the future. The attitude of millennials to significant wealth is drastically different to that of their parents, so by discussing their personal goals you’ll develop a greater understanding of how best to transfer your wealth, in a way that works for all members of the family.
For example, you may learn that your child hopes to buy a house within the next few years or plans to start a family sooner rather than later. They may tell you about their hopes to inherit your business, or their ambitions to begin their own company.
Lead by example
As much as this education process is important, values are “caught, not taught”. Wealthy families have a conscious choice to make in keeping their children grounded in reality so that, when they come to inherit wealth, they’re well placed to manage and invest it responsibly.
If you’re planning a summer holiday with your family this year, talk to them about the costs involved and how the holiday was earned, and shouldn’t be taken for granted. These conversations will help ensure the next generation maintains a level head when they’re at the steering wheel of wealth.
Look to outside advice
Wealth transfer can be an exciting, confusing, and emotionally loaded journey to embark on, for all generations involved. Many families look to outside experts to “steady the ship” and help educate and prepare the next generation for the future. Whilst an adviser can never replace the role of a parent, they play a valuable role in providing carefully considered insight on the practicalities of managing significant wealth and helping curate a plan to match their life goals.
There is no perfect formula
It’s important to remember that every family is its own unique ecosystem with its own set of challenges, priorities and dynamics. As such, there is no “one size fits all” formula to determine when your children are the right age to begin talking about wealth transfer. Every family can and should have their unique approach. This summer, take some time to consider how you’ll embark on this journey, and any help you may need along the way.
Contributed by James Fleming, CEO of Sandaire
James Fleming is the Chief Executive Officer of multi-family office Sandaire. James has over 30 years of experience of working with families of significant wealth both in the UK and internationally.
Sandaire is a family-owned international multi-family office offering expert investment, corporate finance, private equity and real estate advice to wealthy families and foundations seeking support with their long-term financial goals. These services are provided by a team of specialists who build partnerships by taking the time to understand each client’s needs and crafting innovative, tailored strategies aimed at fulfilling their aspirations. Sandaire understands that wealth goes beyond more than performance and the family office services are there to support your goals, from succession planning to philanthropy and legacy planning. When a client walks through the door, they become part of the Sandaire family.