Inheritance is always desirable and can benefit the lives of heirs and children. But inheritance is not always beneficial. At times, inheritance can be the cause of contention, squabbles, ugly fights, and even lawsuits. In other words, too much family wealth can be disastrous. While the dilemma of having too much money is not undesirable, inheritance’s power needs to be handled cautiously. Inheritance instills financial responsibility if channeled well, but creates carelessness, apathy, and toxicity if not. Below are three elements to bear in mind to avoid such dangers.
Inheritance as a Stepping Stone
Inheritance or family wealth can work wonders if it is used as a stepping-stone. Money used for higher education, to fund a promising startup, or to help the existing businesses and investments of the family grow can be ideal utilities of inheritance. At the same time there is the flip side. Money spent on depreciating assets, on businesses that are more romantic than pragmatic feasibilities, indulging in extravagant spending sprees, and lack of financial responsibility, can quickly vaporize family wealth.
Take for example a child who has just moved to a lively and energetic big city. This child is next given by the generators of the wealth extravagant housing, lifestyle spending budgets, and no pressure to hold a job. What can, and often does, result is a lack of responsibility or direction for the child. Strive to impart positive and constructive values for your next generation that can instill within them motivation, excitement, and genuine understanding and appreciation for the dollar.
When Family Wealth is the Cause of Dispute
The dilemma of too much money becomes very complicated when there are several heirs, including some who may not be the immediate kin. In such instances, inheritance must be clearly explained and everyone should know the grantors’ will. Setting the right kind of expectation is always better than distributing the family wealth and then having to explain why someone got less and why someone got more.
While these types of conversations can be difficult to have, emphasize the importance of equal giving. If certain situations present equal giving, identify the reasons why equal giving may not be possible and address those issues with the individuals involved. This may be a particular habit exhibited by your heirs or certain family ties. Over communication can help individuals understand important elements of their wealth and create a constructive atmosphere for giving.
Managing Inheritance & Family Wealth
Not every fortunate heir is trained or talented enough to manage money. Many may only know how to spend. Financial responsibility can be elusive and utopian in some cases. Therefore of import is considering trusts and other ways of managing inheritance and family wealth. Many people opt for trusts, estates and hire financial planners and fund managers who will take care of the family wealth, regardless of how much heirs are entitled for and when.
In an effort to complement the guided financial advise your heirs should receive, begin at earlier ages of teaching your family and heirs about wealth, how your wealth was generated, and ways in which they can not only maintain, but grow their inheritance. These types of conversations will help create productive and positive environments for inheritance and wealth management.
The statistic is that most families lose their wealth by the third generation. That happens primarily because those benefiting from inheritance don’t contribute much and instead facilitate the decline of family wealth. By following and applying the above-mentioned elements, you will be on a stronger path to ensuring that your family wealth does not fall prey to statistics or devastations.