The great wealth transfer — start the conservation
Wealth may pass to the next generation in a day. Understanding how to look after it takes much longer. In the second article in our series on wealth succession, Head of Distribution JULIE MACLEOD-HENDERSON explains why families should begin talking well before an inheritance arrives.
A last will and testament can tell a family who gets what. But it does not explain why assets were built, how they have been invested or what the person who built them hoped they would achieve. Those questions are harder to ask once that person is gone.
In the first article in this series, I argued that wealth can be inherited, but stewardship must be learned. Families often agree with that principle and still put off the conversation that would make it possible. Parents may be uncomfortable discussing death or worry that talking about an inheritance will create expectations. Some have simply always kept money matters private.
Adult children can be just as reluctant. They may have questions but fear appearing presumptuous by asking them. Each generation waits for the other to begin.
The cost of that silence becomes clear when wealth changes hands. Someone may inherit a portfolio without knowing why it holds certain investments, what it was intended to provide or how much risk its owner was willing to take. The assets arrive with instructions for their transfer, but little guidance on the decisions that follow.
Families can begin this conversation without discussing account balances or promising anyone an inheritance. A parent might explain how the wealth was built and what they learned during difficult periods. What was the money meant to make possible? Which commitments should it continue to support? These are questions an adult child can ask, too. ‘What would you want us to understand about the decisions you have made?’ is a reasonable place to start.
Such discussions need room for disagreement. The next generation may face different needs and see some choices differently. Explaining the thinking behind a decision gives them a better basis for making their own. It also gives parents a chance to hear what their children know, and where they may need help.
Over time, the conversation should become more practical. Future decision makers need to know where important documents are kept, whom to contact and whether an investment serves a particular purpose. A family need not settle all this over one dinner. It is easier to build understanding through several conversations while everyone has time to think and ask again.
Passing on wealth involves more than arranging its transfer. The sooner families talk about the decisions behind it, the more chance the next generation has to learn before those decisions become theirs.
This is the second in a series of articles on how families can prepare for this generational transition: from starting meaningful conversations and involving younger family members, to helping future investors understand the value of long-term investing. Wealth can be inherited, but stewardship must be learned.