The Philanthropic Family

To paraphrase my friend Regg Wilson, there are three things highly successful people can pass on to their kids:

1. Money and other financial assets
2. Skills and habits that lead to success
3. Environment/Infrastructure

If you could only pass on one of these three, says Regg, you would likely choose the third, raising your children in the United States instead of, say, Darfur. If you could only pass on two of these things, you would likely pass on the second and the third, so that even if they started out broke in the land of opportunity, they would have the skills that allow them to create their own successful lives.

And yet, as Jay Hughes pointed out many years ago, all of our planning tends to focus on the transfer of money from one generation to the next.  And this narrow-minded focus on the financial capital to the neglect of the human, social and intellectual capital of the next generation is what causes 70% of estate transfers to fail. That’s right–70% FAIL.

What do we mean by “fail”? It’s not the failure of money to reach the heirs (estate attorneys are effective at the technical aspects of their job), it’s that the family disintegrates and splinters, and soon dissipates the wealth and stature that it once enjoyed.  If you play that 70% out over just a few generations, you will see that grandchildren have just a 9% chance of maintaining the family wealth enjoyed by the current generation.

So what do those 9% who beat the odds have in common?  According to experts like Barb Culver,  three things:

1. They talk about things that matter.  Not just what’s on TV this week
2. They practice organized, regular family philanthropy, instilling a shared identity and a sense of gratitude
3. They include the heirs in the planning. No “surprise” party on their 35th birthday that comes with the revelation that they are the beneficiaries of a $10 million trust when they’ve never learned to balance their checkbook.

Even if we’re not passing on vast sums, these seem to me like practices for healthy families of every size.

Tags: charity, estate planning, family wealth, philanthropy

This entry was posted on June 22, 2009 at 5:17 pm and is filed under Involving the Next Generation, Lifestyle. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.