How to Prepare Heirs to Handle a Family Inheritance

New approach calls on the older generation to share their experiences and values
with heirs

By STEVEN ABERNATHY & BRIAN LUSTER

April 12, 2015

When wealth is passed down through generations in a family, the long-term prognosis
generally isn’t very good. Research shows that in most families, 70% of inherited
wealth is lost by the second generation and 90% by the third.

A new approach to wealth preservation called heritage design aims to fix that. It
focuses on helping families communicate better about their values and traditions,
and how they want an inheritance to be managed.

Rather than using an attorney-drafted document to communicate a grantor’s wishes,
heritage design relies on a set of pre-inheritance experiences shared over a
lifetime between older and younger generations.

I like to compare it to fishing. Say your grandfather is an excellent fisherman and
he wants his heirs to be great at it, too. He could have his attorney write up a set
of instructions. Or, if he really wants his heirs to learn how to fish, he could
take them on a fishing trip to Montana every year for 40 years.

At our firm, we start by interviewing grantors in great depth, encouraging them to
share the stories that reveal how they became the people they are. The end result is
a heritage statement, a succinct distillation of the family’s stories, values and
traditions that provides a rich context for how the grantor wants the inheritance to
be managed. This can take the form of a website, video or book.

From there, we set up an initial inheritance day, the first meeting of all of the
intended heirs. After that, the family ideally will gather at least once a year to
reinforce the family’s values and traditions and teach younger generations how to
handle the wealth they stand to inherit.

Many people spend their whole lives accumulating wealth. But unless they take the time
to prepare their beneficiaries to inherit it, much of that effort ultimately could go to waste.

Steven Abernathy counsels affluent families on multi-generational wealth management strategies.
This includes: asset protection, wealth management, estate and tax planning, and Heritage Planning. 
He can be reached at: sabernathy@abbygroup.com or 888-422-2947.

 This article was originally published in the Markets section of The Wall Street Journal.