The Challenges and Opportunities in Multi-Generational Planning

The Challenges and Opportunities in Multi-Generational Planning

Numerous studies have highlighted that 90% of wealth does not last beyond 3 generations of a family. This phenomenon is not new. In fact, Adam Smith remarked in The Wealth Of Nations that “riches, in spite of the most violent regulations of law to prevent their dissipation, very seldom remain long in the same family.”

There are three big-picture components of multi-generational planning that are critical to consider for successful transfer of wealth. The first two components address money directly; the third one is about preparing the family for receiving the inheritance and managing it wisely.

Financial planning

Financial planning allows families to align resources with expenditures in a way that supports what is most important to them. By working with a financial planner or investment advisor, families can protect and grow their wealth.

Estate planning

Estate planning addresses what happens to assets (financial and non-financial) after the first generation of the family passes on.

Legacy planning

Legacy planning moves away from dollars and assets, and shifts the focus to relationships, education, and preparedness. Many clients report that leaving a legacy in the form of values and life lessons is more important to them than leaving money.

This is an area that many CPAs and financial planners do not cover, although it has the potential to add significant value to clients. If 90% of families cannot preserve their wealth beyond the third generation, what would it mean for your clients to be in the other 10% that succeed?

Research has shown that families that successfully transition wealth across generations address the following issues early, in a structured way, often with the help of a trusted advisor.

Family history and values

Values, stories, family traditions, and accumulated wisdom together create the unique profile of each family. Identifying and preserving those elements can help families come and stay together.

Remembering the story of wealth accumulation, sharing discussions of what money represents and what it is for, and explicit agreement on internal family “rules” can all be used effectively in bringing values and family history to the surface.

Careful estate planning and business succession can ensure that the technical aspects of transition are executed in accordance with the deceased person’s wishes. However, they alone are insufficient to maintain harmony in the family. Shared work ethic, hopes and dreams, traditions and faith can keep the family together, regardless of the money situation.

Communication and relationships

Effective and constructive communication among family members is critical to continued harmony and mutual understanding. Whether the family chooses to establish formal family governance, or keep it informal and fluid, skillful facilitation can be helpful in guiding difficult conversations.


Well-off and affluent parents often worry that their children won’t learn the value of money, or will not have the satisfaction that comes from making a living. The best course of action is to take charge of their financial education.

A healthy relationship with money is transitioned best when both taught and modeled for the younger generation. Through continuous education and practice, combined with constructive leadership by example, children can absorb the basics of good money habits. Whether the focus of the conversation is on saving, preventing debt, or giving back to the community, the ultimate goal is to raise self-reliant and productive individuals.