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The Importance of Preparing Your Family for Inheritance

March 23, 2016|By Angelica Palm


A substantial estate and family legacy can take a lifetime to achieve, built on aspirations for a better life for yourself and future family generations. However, history has proven that maintaining a family’s fortune can be more difficult than creating it when those left with the inheritance are not prepared. How do you ensure that the wealth you’re building for your family will perpetuate throughout future generations, rather than dwindle to nothing in just a matter of decades?


This is not a new problem or an issue solely symptomatic of the current younger generations. Loss of wealth in families through only a few generations has been marked throughout history. While the first generation creates the wealth, the second generation lives at a higher standard of living without working to grow the capital the previous generation accumulated. According to Barrons, 70% of family wealth is destroyed by the second generation. By the third generation, loss of wealth exceeds 90%, leaving the fourth generation with little. While this pattern has existed for centuries, your family can thwart this unfortunate circumstance by preparing heirs for inheritance.


Many families that have lost their fortunes may fault poor investments or economic downturns for their failure to foster longevity in wealth. However, many other families have persevered through these times and have managed to secure their fortunes. Williams Group, a financial consultant company, studied this phenomenon, surveying more than 2,000 wealthy families over the course of two decades. They found that investments and economic trouble had little to do with loss of family fortunes. Instead, the largest contributors were internal communication and trust issues, with education and preparation levels a second leading factor.

According to the U.S. Federal Reserve, at the end of the third quarter of 2015, American households and non-profits had an accumulated wealth of $85.2 trillion. A large portion of this wealth lies with baby boomers who will be leaving some of this wealth for their children. Yet according to a study performed by the U.S. Trust, over half of them have not disclosed the extent of their wealth to their children--13% have not discussed the subject at all. With younger generations unaware of what is to come, there is no way they can be fully prepared to perpetuate the wealth they inherit.


The answer to this age-old dilemma is not a quick fix. How do you prepare your children to responsibly inherit the fruits of your labor while generating their own wealth for future generations? While smart investments and tax planning are as important as a smart financial strategy, you also must open the lines of communication and build trust. Families that persevere and build wealth across multiple generations talk to one another. Senior generations offer heirs a complete understanding of their responsibilities, and options in managing the family’s wealth. The sooner you can begin, the better. Share how you built your fortune, your methods of saving and help younger family members plan for their own contributions to the family legacy.


At The Bank of San Antonio, we are here to help you build and protect your wealth for your family. Talk to one of our wealth advisors about personalized strategies to help you and your family realize your financial goals and plan for the future. With a clearly defined vision and plan for your estate, you can increase your chances of maintaining wealth rather than depleting it over generations.

To contact us today about your family’s financial future, contact us here.