When it comes to money, be sure to listen to your heart

​According to one study, 70% of rich families lose their wealth by the second generation. Worse, by the end of the third generation, nine out of ten of these families are no longer wealthy.

Why does this happen? Do we, as well-meaning parents and grandparents, focus too much on making sure our children and grandchildren end up with as much of our money and things as possible? When we sign the thoughtfully and carefully constructed estate planning documents, do we feel like we’ve done our best to set our family on the road to a sound future?

A somewhat dated, but still relevant, survey (from 2007) by a large financial institution revealed wealthy Americans’ concerns about the effect of their wealth on their children.

• 87 percent agreed with the importance of encouraging entrepreneurial values in children,
• 80 percent agreed with teaching children that wealth is a social responsibility,
• 53 percent were concerned about the negative impact of wealth on children,
• Relatively small 43 percent felt they owe it to their children to leave a sizeable trust.

 
In a separate survey by a large international law firm, the second greatest fear of 3,000 wealthy families around the world was, “My children will lack the drive and ambition to get ahead.” (The greatest fear was about their own health.)
 
These concerns seem more to do with values, principles and virtues, and less to do with money and things.  
 
If you are fortunate to own enough assets to consider passing to future generations, perhaps your emphasis should be less about maximizing what you pass on to your children than values and principles you want to inspire your children and grandchildren to embrace in terms of work, family, charity and generally being a decent human being.
 
With this focus, your estate plan can become more about what truly matters to you.
 
This way, you may not understand all the legal nuances of your estate planning documents, but you know why they exist and what purposes they serve. You are not intimidated by all the head-spinning legal talk because your estate plan is simply there to serve you – simply a means to an end – and not the other way around.
 
After all, you have 3 in 10 chance that your children will keep what you so lovingly leave behind. And only 1 in 10 chance that your grandchildren will still be enjoying your gift to them.
 
It’s definitely worth you time and energy to get your estate plan right. 

We do not provide legal or tax advice. Readers should consult their own legal or tax advisor. There is no guarantee investment strategies will be successful. Investing involves risks, including possible loss of principal. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit. Investors should talk to their financial advisor prior to making any investment decision. This information is intended for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.