Problem Statement and Assumptions

• Assumption: families with above-average amounts of assets/wealth pass their wealth down many generations.

• Data: 68% of people with $30m+ in wealth are self-made; 24% - inherited and self-created; 8.5% - solely inherited. [a bit of rounding up here]

• Problem: 70% of wealth ends on the 2nd generation; 90% - on the 3rd generation.

• Parents may plan to pass down their wealth, but heirs may not be able to handle it.

• Heirs get overwhelmed and underprepared.

Separate Yourself from Your Wealth

• It’s understandable that parents don’t want to spoil their children or think kids are not ready yet.

• Emotionally hard to let go of the grasp on the money —> starting the transition process too late.

• Failure to prepare the heirs for the responsibilities of managing an inheritance is bad for both the heirs and the assets.

Devise a Proper Estate Plan

• Superstitions aside, people hate planning for family affairs after death.

• Only 32% of Americans have a will and even less so – an estate plan.

• Important to audit the tools to identify the assets and the most tax-efficient ways of passing them to the heirs.

• If children are young —> find a guardian and make a plan to gradually pass the inheritance to them not to overwhelm them with the money.

Give Your Children a Sound Financial Education

• As a bare minimum heirs must be well versed in basic finance concepts.

• Teach them to handle their personal money / allowance.

• [MK: strongly suggest finance course or at least a couple of units on finance]

Update Children on the Changes in Net Worth

• Openness and honesty [age-appropriate and context-suitable] in communication about parent’s finances.

• Get children involved in allocating money to charity and other expenses to give sense of responsibility and stewardship.

Encourage Kids to Build Their Own Wealth

• To discourage children from becoming “trust fund babies” make the inheritance distributions staggered based on milestones.

• Encourage ambition and desire to establish careers [family business or otherwise].

• [MK: explain the contents above to the children, too, so that they can repeat this process]

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