Families blessed with significant financial resources can make an amazing and long-lasting impact on the world. But that wealth can also lead to disagreements, grudges and hurt feelings. Trying to hide from the conflict – to “sweep it under the rug” – does not make it go away. The best thing a family can do is create a culture of open, honest conversation about the impact their wealth can have, as well as the pitfalls. Communication is therefore one key factor in sustaining wealth for generations.
Those sorts of conversations best begin at a young age with those who are expected to inherit wealth. Consider a practice where each day you share with each other something that went well regarding the family, something you are proud of, or something you are grateful for. Also share something that was hard – a mistake you made, a time you were anxious or nervous, a feeling of embarrassment or anger or a story about how someone hurt your feelings. Tie this to what the family is trying to achieve with your wealth, your legacy.
This daily practice makes a habit out of being vulnerable, which is very healthy. It demonstrates that it is normal to have good and bad moments and that it is helpful to share them with someone you trust. When someone in the family does or says something upsetting, do not let it fester. When we model this environment of open communication, the next generation grows up believing it is helpful and safe to talk about feelings, and that honesty – even when it hurts – is healthy.
Talk about the Elephant in the Room
Despite best efforts (or denial), all families have “baggage.” While some baggage may be best left locked up in the trunk, most should be carefully unpacked. If there are elephants in the room at family gatherings that hold your family back from achieving your goals and objectives or from achieving your shared legacy – it is important to discuss them.
It’s natural to feel trepidation that the conversation could be uncomfortable. But it doesn’t have to be. When hashed out in a safe, neutral environment (often with the help of a trained facilitator), it can be tremendously helpful in bringing the family together.
Why, When and How to Talk about Money
For generations, money has been an undiscussable topic, even thought of as rude to talk about. Nothing could be further from the truth. The stigma around money is so pervasive that research indicates that many parents consider talking to their kids about money to be more uncomfortable than talking to them about the “birds and the bees.”
Silence is often interpreted negatively and therefore we grow up with the mindset that money is an uncomfortable or taboo topic. The result? Many inheritors are unprepared for how to deal with the emotional and financial implications of new-found wealth because they never talked about money, what it can do and how it can bring a family together around a shared vision.
We recommend to start the conversation by talking with inheritors about the family history; about the successes and challenges along the way and the values of the family. Teach formally and informally about financial concepts, from opening a savings account and the advantages of compounding, to budgeting and smart spending. If you have an account like a Uniform Transfer to Minors Act, talk to the beneficiary about it before they become age of majority and the assets legally transfer to their name. When it comes to higher education, it may be worth sharing (if it aligns with your values) that you would support pursuing a career or major they enjoy even if it is not the highest-paying career. If you have an irrevocable trust and financial disclosure to beneficiaries is required, have a discussion before they receive the financial statement.
As children mature into adults and begin living on their own, it’s important to share more details about the family’s wealth and the impact that the family wants it to have. Give them ownership and a voice in that conversation and legacy.
Bottom line? Create an environment where difficult topics can be talked about openly. And yes, that includes talking about money. Wealth can be a blessing, but it takes thoughtful intention, preparation and communication to ensure it does not become a burden.