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Key Considerations for Preparing a Family Legacy Plan

Just as important as the transfer of money is the passing down of core family values.

By Shari Burns

Over the next 20 years, $30 trillion dollars could be transferred from the current generation to the next, making now a critical time for advisors to discuss multigenerational planning with high net worth clients. Along with planning for the financial inheritance, of growing importance is the transfer of emotional inheritance, or passing down and preserving core family values.

Inheritance is not only about the money, but also about individual and family priorities, decisions, purpose and passions in life. Studies reveal that 90 percent of wealthy families will have lost the family wealth by the end of the third generation. The demise of wealth lies in the fact that heirs have not been sufficiently prepared to receive wealth or learn about stewardship of the family assets.

Once a taboo subject, there is a growing trend toward more open communication within families about values, money and legacy. Leading families through the process of preparing for an inheritance can help financial advisors deepen relationships with existing clients and form new relationships with their children.

When approaching legacy planning conversations, consider the following:

1. Expose Children to Family Values by Teaching Money Management Early

Money management skills should begin as soon as a child can understand the concept of money. Work with your clients to teach their children about budgets and prioritizing expenditures. For example, rather than giving kids one piggy bank for spare change, parents can encourage children to allocate allowance and gifts to four buckets: Spend, Save, Invest and Donate. Another effective tool for parents is the iAllowance app, which helps children track goals and rewards regarding chores and allowance.

These approaches teach children that if they want something, it’s important to save for it, which builds their confidence and independence over time. By their teenage years, many will have a better understanding of money and the emotions involved. This familiarity with money, and the values that are linked to financial decisions, leaves the next generation better able to accept the responsibility of an inheritance in later years.

2. Initiate An Exploration of Shared Family Values

A shared understanding of core family values is key to ensuring a smooth inheritance. Often, a parent or grandparent is responsible for guiding a conversation about family values, but as an advisor, you can play a leading role in framing the discussion.

Family values are linked to major virtues that are objective, eternal, universal and do not change from generation to generation. These values are the foundation of the family and can include honesty, humility, responsibility and temperance. Beyond the values of the family, a family member should also determine his or her individual values, which for many can be a lifelong process.

There are many resources that can help clients and their families determine their values and priorities. For example, Allyson Lewis, coach to financial advisers and developer of the, offers a course that helps individuals identify values that are most important to them and create a life purpose. Other tools to get started are the Path Elements Profile (PEP), Financial DNA and resources offered by the Enneagram Institute.

3. Foster Shared Family Giving

Charitable giving conversations can be a great way to initiate discussions about passing on family values. Creating a legacy of shared family philanthropy is one of the best available ways of preparing future generations for leadership roles in their communities and families. Children must understand that inherited wealth is not only a means for personal gratification but carries with it a responsibility for advancing the public good and giving of yourself as well as the money.

Advisors can participate in the process to help educate and provide expertise. Families should have honest and open conversations, and allow each participant to have a voice. This gives the new generations a healthy set of tools that they can take into the world to effect change and add to the family's philanthropic legacy.

A range of charitable vehicles, such as private foundations and charitable trusts, can provide the structure for regular meetings to educate the family on grant making or financial management. Additionally, donor-advised funds – which are available from national providers associated with financial institutions, such as Schwab Charitable and Fidelity Charitable, or from community foundations – are easy to use and are an effective tool for engaging the whole family in charitable decisions.

4. Behave Like A Team

My final recommendation is to encourage clients to behave like a team. Jim Wares, CFA, and author of High Performing Investment Teams, promotes the Seven Key Behaviors for Top-Performing Teams. These include: Curiosity over defensiveness, emotional intelligence, authenticity, accountability, candor and appreciation. Families should create a fearless, open process for learning and problem solving with a focus on actions and results.

When helping clients create a family legacy plan, the most important asset is the people within the family. Discussions on family values and charitable giving can be used to invest in and educate each family member and prepare them to make valuable contributions to the fabric of the family.  


Shari Burns, CFA, is a Managing Director of United Capital in Seattle, which specializes in customized portfolio strategies for families, trusts and foundations.

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