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How to Secure a Successful Generational Wealth Transfer
August 15, 2023
Adam Yale, Partner and Portfolio Manager
Bruce Van Kooten, CFA®, Partner and Portfolio Manager
Chad Clauser, CFA®, Partner and Portfolio Manager
Tom Sudyka, CFA®, Partner and Portfolio Manager
Building a legacy that spans multiple generations is a compelling aspiration for many families and individuals as they approach retirement. However, turning that vision into reality requires careful planning and preparation.

Above all else, you should start planning your wealth transfer process before you think you need it. Too often, nonexistent, incomplete, or uncommunicated plans sink the best of wealth transfer intentions. Preparation is the key to successful estate planning. While your plan doesn’t need to be revisited continuously, it often needs to be refreshed periodically. Make sure you are at least reviewing your choices every few years. Further, make sure you communicate those plans with your children periodically, too.

It may be easy to assume that wealth will automatically be preserved within a family. However, a study conducted by The Williams Group consultancy of Princeton, NJ revealed that an estimated 70% of wealthy families lose their wealth by the second generation, and a staggering 90% lose it by the third generation.

This underscores the critical importance of having a well-crafted plan in place for transferring generational wealth. Such a plan serves multiple purposes, including protecting beneficiaries from court intervention, minimizing unnecessary tax burdens, and mitigating potential family conflicts.

A comprehensive wealth transfer plan can also position your beneficiaries for success at an earlier stage in life, enabling your children to build their own wealth, and seize opportunities that may not have otherwise been available to them. But what are the key steps to ensure a successful multigenerational wealth transfer?

Key Takeaways:

  • Building a legacy that spans several generations requires careful planning as early as possible in order to secure a successful wealth transfer.
  • Teach your children to be financially responsible. Generational wealth often dissipates due to lack of knowledge around financial literacy.
  • Hiring a family CFO can provide valuable expertise and oversight to help safeguard your financial well-being and ensure a solid foundation for your family’s financial future.
  • Create a well-defined, formal family mission statement that outlines the core principles that guide and unify the family across generations.

Teach Your Children to Be Financially Responsible

Regrettably, generational wealth often dissipates due to a lack of education on how to manage wealth effectively. The Williams Group study also revealed that 78% of individuals believe that the next generation is ill-equipped to handle an inheritance, and 64% of wealthy families disclose little or nothing about their wealth to their heirs.

Many families shy away from discussing finances, leaving their heirs unprepared to handle wealth. Even among the wealthiest families, fortunes can vanish rapidly without instilling financial literacy in the younger generation. When teaching the next generation about wealth, keep in mind that strategies will look different depending on the ages of the children involved.

If you have younger children, it’s crucial to teach them the value of money by allowing them to earn an allowance and instilling the benefits of budgeting. Talk about finances and your business at the dinner table. This communication helps establish a foundation for understanding personal finance early in life.

For your older children, attending investment meetings with you can be beneficial, as it exposes them to investment strategies, asset planning techniques, and tax laws that may affect their inheritance. In cases where a family business is involved, providing the next generation with a role in the business can offer them valuable experience in accounting, budgeting, and cash flow analysis, among other business disciplines, ensuring a smooth transition and continuity of the business.

By prioritizing financial literacy and providing practical education to heirs at a young age, families can significantly enhance the chances of a successful multi-generational wealth transfer.

Regrettably, generational wealth often dissipates due to a lack of education on how to manage wealth effectively.

Download our Comprehensive Guide to Generational Wealth Transfer today and be prepared to successfully convey your wealth to the next generation.

Assess Your Family’s Current Situation

Another important step in securing a successful wealth transfer is to take an assessment of your family’s current situation. Start by compiling a comprehensive set of financial statements, including an income statement (income and expenses), and a balance sheet (assets and liabilities).

Next, create a list that includes the locations of all legal documents relevant to your wealth transfer plan. This should encompass wills, trusts, insurance policies, powers of attorney, healthcare directives, and any corporate documents for a family business, such as articles of incorporation and bylaws.

Furthermore, conduct a thorough assessment of all family members and individuals outside the family who may play a significant role in carrying on the family legacy. Identify their strengths and weaknesses, and consider the roles they may assume in assisting the family in the future.

Taking a proactive approach to the wealth transfer process can ensure that your family’s legacy is carried forward successfully.

Taking a proactive approach the wealth transfer process can ensure that your family’s legacy is carried forward successfully and in line with your strategic objectives.

Decide How Much Control You Want Once Wealth Transfer Begins

You should also decide how much control you want after you pass and the wealth transfer begins. Some individuals and families want to maintain a significant amount of control; others want only a little. You should communicate your desires regarding your estate while you are alive. Guesswork after your passing can result in a different outcome than you designed.

Alternatively, you may trust your adult children to make the financial decisions that are best for them—and you do not desire to assert control. If this is the case, tell your children your intentions and how you hope issues around your estate should unfold after your passing.

Create a Family Mission Statement

One common reason for the loss of generational wealth is the absence of a shared purpose or family mission. A crucial step in safeguarding your wealth is creating a well-defined, formal family mission statement that outlines the core principles that guide and unify the family across generations. This statement may best be jointly crafted by both older and younger family members, serving as a guide for all decision-making.

By establishing a clear and formal family mission statement, you can instill a sense of purpose and direction that transcends generations, ensuring that your family’s wealth is managed and preserved in accordance with your shared values and principles.

Many family mission statements include three primary components: personal, financial, and philanthropic.

PERSONAL. Review your family’s purpose and identity. Make note of any family traditions you want to carry forward. Determine what issues and values are the most important. Delineate the responsibilities of each family member.

FINANCIAL. Define how your family values will impact your investing strategies. Make provisions on how the family should continue to build and manage its wealth. Decide how you would like to see future generations benefit from your wealth and who would be good stewards of capital.

PHILANTHROPIC. . Evaluate your family’s financial goals for giving. Note the philanthropic organizations that are important to the family.

By establishing a clear and formal family mission statement, you can instill a sense of purpose and direction that transcends generations, ensuring that your family’s wealth is managed and preserved in accordance with your shared values and principles.

Prioritize Goals and Assign Responsibilities

To effectively align your family’s wealth transfer strategy with your family mission, it’s essential to establish both short-term and long-term goals. These goals should be clearly defined, including the objective, the timeframe for achieving them, and the parties responsible for execution. This may involve family members, as well as external professionals such as the family CFO, accountants, attorneys, or wealth managers.

After defining your goals, it’s important to prioritize them and establish mechanisms for accountability. While goals may vary depending on each family’s unique circumstances, they could encompass provisions for the remaining family members, ensuring minors receive education, minimizing tax liabilities, and aligning asset usage with your family’s values and beliefs.

Setting specific and measurable goals, with clear accountability, helps ensure that your family’s wealth transfer plan remains on track and aligned with your overall vision.

Build a Family Governance Infrastructure

A family governance plan provides a framework that clarifies roles and responsibilities for decision-making, while also accounting for changing family dynamics. It outlines how families make decisions by deciding who gets a voice, and how decisions are debated and executed.

Define how the group will be structured. For example, some families have a family council or assembly. Families need to decide what type of structure will work best for their own individual circumstances.

Review the roles and responsibilities of those inside and outside of the family. Define the roles of all family and non-family members such as attorneys, employees, or wealth advisors. Also make sure to define the next generation of decision makers. Making these decisions ahead of time will avoid people being placed in positions without the necessary education, skills, or authority.

Securing your wealth for the next generation takes quite a bit of planning. Your goals should be clearly prioritized and defined, including the objective, the timeframe for achieving them, and the parties responsible for execution. This may involve family members, as well as external professionals such as the family CFO, accountants, attorneys, or wealth managers.

A family governance plan provides a formal framework that clarifies roles and responsibilities for decision-making, while also accounting for changing family dynamics and needs.

Choose Your Professional Partners

When it comes to creating your estate plan, you have a range of options to consider. You could opt to work independently, or hire individual experts and oversee and integrate their activities. In Omaha, there are many choices available. However, it is crucial to make certain that your objectives are aligned with your advisory team, that all fees are reasonable, and there is a plan in place should any of your partners leave. Consider hiring a team (and authorizing a team lead) consisting of an estate attorney and wealth manager.

Your investment advisor should understand the objectives for each pool of assets that is invested with them. Choose an investment advisor that is right for your needs and understands your estate objectives and all tax implications and tax dynamics.

A reputable estate attorney should be able to listen to your legal concerns, suggest appropriate estate solutions and communicate to you in easily understandable explanations what your wealth transfer vehicles do.

Additionally, it is essential to stay in touch with your professional team on a regular basis to ensure your beneficiaries and assets are up to date, and to inform them of any significant life changes.

It is crucial to make certain that your objectives are aligned with your advisory team, the fees are reasonable, and there is a plan in place should your advisor leave the firm.

Final Thoughts

At Lawson Kroeker, we spend a significant amount of time thinking about our clients’ future goals, their financial plans and our role in helping them get to where they want to be. We know our clients have many retirement planning and wealth transfer options available. We also understand sometimes life happens and that you need your resources at hand in case of an emergency.

It is important to take all of these considerations into account when thinking about how to transfer wealth to adult children, a philanthropic organization, other causes or institutions. We strive to custom construct wealth planning platforms for you to achieve your goals.

About Lawson Kroeker

Lawson Kroeker Investment Management, founded in Omaha, Nebraska, is a third-generation wealth management firm that helps a select group of high-net-worth clients achieve their life goals by providing investment advice and building custom solutions. Lawson Kroeker’s disciplined, patient investment management process focuses on owning the stocks and /or bonds of a focused group of individual businesses. Established in 1986, the firm has under management approximately $600 million in assets.

Adam Yale, Partner and Portfolio Manager—Mr. Yale started his investment career in 1997 with First Manhattan Co., an investment advisory firm in New York, NY as an analyst of publicly-traded real estate securities and direct real estate investments. From 2006 until the 2022 merger with Lawson Kroeker, Adam was the sole Principal at Red Cedar Capital, LLC, a Registered Investment Advisory firm he founded that employed a fundamentals-based investing strategy. He earned a B.A from the University of Michigan and a Master’s in Accountancy from the University of Denver.

Bruce Van Kooten, CFA®, Partner and Portfolio Manager—Mr. Van Kooten has been a Lawson Kroeker Partner and Portfolio Manager since 2006 and has more than 45 years of institutional and private investment management experience. Bruce has worked as a trust investment officer with First National Bank of Omaha and as a senior investment portfolio manager in Denver at KPM Investment Management, which became Wells Fargo Private Asset Management. Bruce earned the Chartered Financial Analyst (CFA®) designation in 1987 and is a member of the CFA® Society of Nebraska. He has a Bachelor of Science degree in Business and Economics from Iowa State University.

Chad Clauser, CFA®, Partner and Portfolio Manager—Mr. Clauser began his investment career as a senior analyst at an Omaha-based investment advisor Tributary Capital Management, and later as vice president of the New York investment bank Credit Suisse. He earned the Chartered Financial Analyst (CFA®) designation in 2009 and is a member of the CFA® Society of Nebraska. Chad attended the University of Nebraska in Lincoln, where he received a bachelor’s in Finance and completed minors in both computer science and mathematics.

Tom Sudyka, Jr. CFA®, Partner and Portfolio Manager—Mr. Sudyka began his career as a portfolio manager with several large Midwest-based investment management companies. He served as a managing director and founding partner of BPI Global Asset Management before joining Lawson Kroeker in 1999. His investment decisions are guided by his 30+ years of investment management experience. He has an M.B.A. in Finance from the University of Nebraska and a B.A. in Finance from Creighton University.

Download our Comprehensive Guide to Generational Wealth Transfer today and be prepared to successfully convey your wealth to the next generation.