In my work with family stewards, one of the most frequent issues arises around the need for passing the torch to the next generation. Especially in families with significant wealth that has been passed along to multiple generations, the desire to strengthen and perpetuate a philanthropic legacy is often a core value that requires not only careful planning, but nurturing with those who will become custodians of the legacy in future years.
This topic is especially timely now, when some $68 trillion in wealth is expected to pass from one generation to another over the next two to three decades. How will family stewards and other trustees ensure that the next generation of family leaders has both the vision and the knowledge to further the philanthropic values of those who created the wealth and established the original conception?
One important factor is good communication practices. Family stewards should begin conversations with younger generations well before they assume leadership roles. These conversations should revolve around the family organization’s core philanthropic values and priorities, but they should also encompass younger members’ ideas and values. It’s important to remember that while the traditional objectives of family philanthropy may have revolved around faith-based organizations and traditional nonprofit organizations that might be part of the local United Way, Millennials and even GenX’ers are likely to bring their own social and ethical priorities to bear on their views toward philanthropy; this may include organizations and efforts that are unfamiliar to their elders. It will be important for the older generations to listen carefully to what their heirs are saying if they want to foster the type of deep commitment that guarantees perpetuation of a legacy. Some families even develop “pitch” sessions, where members bring information about a charity or cause they are passionate about, seeking to demonstrate why it should benefit from the family’s generosity.
Another important topic revolves around communication from the older family members to the younger ones about expectations, responsibilities, and resources. Learning that you are responsible for making decisions about a multi-million-dollar trust should not happen when the will is read. Instead, you should be able to learn the ins and outs of the family organization over time, with the ability to thoroughly absorb the information and incorporate it into your future planning. Those with more experience should begin the mentoring and advising process early, ideally allowing a number of years for the concepts of responsibility, stewardship, and decision making to “sink in.” And where special assets are concerned—such as art works and other collectibles, certain types of real estate holdings, and other holdings that may be either illiquid or require sensitive handling in order to realize their maximum value—communication should be purposeful and specific. Stories abound of priceless paintings ending up at the local Goodwill instead of being auctioned and the proceeds used for worthy ends, because the inheritors had no idea of their value.
As a fiduciary financial advisor and wealth manager, I specialize in helping family stewards utilize donor-advised funds, trusts, and other estate planning tools to maximize their philanthropic efforts. To learn more, click here to read my article, “Passing the Torch: Making Sure the Younger Generation Catches the “Giving Habit.”
Stay Diversified, Stay YOUR Course!