“Keep the Money Together”: The Care and Feeding of Intergenerational Wealth

The title of this article is a quote from Cornelius Vanderbilt, the famous nineteenth-century railroad and shipping magnate whose fortune enabled him to endow, among other things, Vanderbilt University, still a highly respected institution of higher learning. But sadly, Vanderbilt’s family did not follow his advice about the family wealth. Though his son, William, was able to double the family fortune after his father’s death, the story for the next generation was not so good. Rather than working to consolidate and expand the Vanderbilt legacy, they began spending on luxurious homes and other things that depleted the coffers. By the time Cornelius Vanderbilt had been in his grave 50 years, the family fortune was gone.

In a previous blog, we shared some foundations for building a financial legacy that can continue through the generations, and in this article, we’ll look at some ways to help protect that legacy beyond the third generation.

  1. Develop “distance vision” for your financial legacy. Too often, family stewards focus on the needs and predispositions of the second and third generations, but fail to project far enough into the future. To build a truly intergenerational financial legacy, you need to cast your imagination farther ahead, giving consideration to generations you will not live to see. Admittedly, it can be hard to “see past” the faces of your children and grandchildren, but keep in mind that those future descendants will be someone’s children and grandchildren; they deserve attention, too.
  1. Create a record of your vision for your wealth. Estate planning is vital, of course, but too often it doesn’t go beyond what happens with your children and grandchildren after your passing. In addition to well-designed wills and trusts, your heirs need to understand your vision for the family wealth: how you wish it to be used; how you intend for it to be replenished by each generation; what you want your wealth to accomplish, long after you’re gone, both for the family and also for philanthropy. This document should become part of the family’s financial worldview, shaping the assumptions and understandings of each successive generation. In our previous article, we mentioned the importance of a multigenerational culture of financial education; part of that education must include an understanding of your vision for the legacy and why it must be preserved and strengthened by those who come after you. Unless you clarify your wishes and intentions in writing, you can’t assume that those who follow you will “get it.”
  1. Design a governance plan that can endure. Every successful business leader understands the importance of succession planning. For families seeking to maintain and build generational wealth, this is even more crucial. Good governance of the family enterprise can help to ensure that those who inherit leadership roles are ready for them. It can also provide guardrails against disruptions caused by the unexpected: premature death of a key individual; disputes among family members; and other events that can pose challenges to the smooth functioning of the enterprise. A properly designed governance and continuity plan can help to “institutionalize” a shared vision, providing stability amid the passing of years and the inevitable changes that come over time.

Empyrion Wealth Management – Mercer Advisors believes that thoughtful family stewards require more than investment guidance; they also need seasoned counsel on matters of estate planning, financial education, and vision-casting for future generations. To learn more about how we work with family stewards to help establish and maintain financial legacies, read our white paper, “Family Stewards.”

 

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All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors. Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning document preparation and other legal advice are provided through Advanced Services Law Group, Inc.