Money Matters: Wealth Transfer

Citi Private Bank recently surveyed 200 affluent families around the world. What each of them had: a net worth in excess of $25 million. What 62 percent of them didn’t have: a plan for guiding the next generation to be a responsible stakeholder in that wealth.

Cayman Wills

Family wealth in the United States totaled $140 trillion last year, according to a report by Cerulli Associates. And no wonder. Over the past 40 years, the S&P 500 index has soared, from 144.3 at the beginning of 1983 to 3960.66 on the first of this year. Even home prices have risen 500-fold. But as family assets have increased, so too have the ages of progenitors. Cerulli estimates that $84 trillion will be passed along to the next generation of Americans by 2045, $16 trillion in the next ten years alone.

Preparing the next generation for all this wealth is a tall task. Is your family ready?

Cayman Wills, managing director with Citi Private Bank in Greenwich, believes that the key to preparing family members to inherit and manage multigenerational wealth is to “begin at the end. Twenty-five years down the line, what does the successful family look like? Start at that goal and work backward.”

Wills isn’t referring exclusively to preserving or growing those millions. Instead, “success” can mean preparing Muffy and Junior for taking on leadership roles, maintaining family values, becoming conscientious stewards of wealth—in the family business and in life. This can prove challenging, as younger generations in wealthy families often exist and socialize in a bubble, the survey noted. They may lack experience with leadership, economics, entrepreneurship, family governance, global investments or even simple budgeting or buying a home.

Just as accumulating wealth came from planning, so too should transfering that wealth, Wills says. “How is that decision-making achieved? Many of our clients have an annual family meeting where you can review a lot of these topics. It starts with: what are our long-term goals, and what do we want to instill in our next generation?”

Such conversations can turn prickly. Enlisting help from a financial advisor with expertise in wealth transfer can help. A recent event hosted by the MIT/Sloan School of Management for children of Citi Private Bank’s ultra-high-net-worth clients tackled things like fostering entrepreneurial aspirations, networking and mentoring in addition to markets and economics.

“It’s so much more than market knowledge. It’s a very personal experience,” Wills says. “It’s not just money but family dynamics.”

With or without help from an advisor, annual family learning programs and visioning sessions not only help prepare future generations to lead the family enterprise, they can also make the family a more cohesive unit. Older family members who may have devoted most of their working life to creating and building wealth may discover that what their children and grandchildren hold dear isn’t the same as what motivated previous generations. Younger generations might not even know the sacrifices and strategies of their forebears. Building multi-generational bonds not only helps preserve wealth, Wills says, it strengthens families.

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