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How To Avoid An “Affluenza” Outbreak: Preparing Heirs for a Wealth Transition

» Article by MITCH LEVIN, MD, CWPP, CAPP | Featured in the September 2017 edition of The Rational Optimist™ | January 02, 2013

Our advisors commonly assist in legacy planning, that is, the coordinated distribution of client or family wealth, to occur at the end of one’s life. While some seek to give all remaining wealth to their children, grandchildren, or other family members, others hope to give to their favorite charity or charities, and some simply wish to spend it all and “come in on fumes.” Planning for this wealth transition is an important task – one we should approach with considerable attention.

Cornell University economists recently estimated that over $10 trillion in wealth will pass, by way of inheritance, to baby boomers between now and the year 2050. That is a significant sum! We believe it is important for family leaders to bring their heirs into the financial conversation as early as possible. Doing so could help subsequent generations avoid suffering from “affluenza,” a condition often marked by a lack of respect concerning the value of earned money, irresponsibility, and the unfortunate abandonment of family values. While I jest, of course, this is an issue some Summit clients have had the misfortune of facing.

Do we really want our heirs sipping margaritas on yachts in the Mediterranean, especially considering how hard we worked and how prudently we saved? We must accept that money can affect people’s attitudes and behaviors strange ways, even wonderful family members. With this in mind, I’ve included what could be a helpful checklist to provide some insight as to whether your family could be headed for trouble.

Mark a Yes or No for each answer and score them accordingly at the end:

Our family has a mission statement that outlines out our overall intent and purpose of our wealth
All pertinent family members participate in most important decisions, such as defining our wealth mission
All pertinent family heirs have the option of participating in the management of the family assets
Our heirs understand their future roles, are committed to those roles, and look forward to performing those roles
Our heirs have actually reviewed the family’s estate plans and documents
Our current wills for us and other documents make most asset distributions based upon how well they are prepared, rather than their age
Our family wealth mission includes incentives and opportunities for our heirs
Our younger children are encouraged to participate in our family’s philanthropic grant making decisions
Our family considers family unity to be just as important as family financial strength
We communicate well throughout our family and regularly meet as a family to discuss issues and changes

The source of this “quiz” is the Institute for Preparing Heirs. If you scored seven or more “yes” answers, your family is very similar to those families that have successfully transitioned their wealth. Yet, those scoring four to six “yes” answers, should understand that a reasonable investment of time and family effort could pay big dividends with respect to ensuring that a successful wealth transition takes place. Finally, if you answered less than four “yes” answers, the transition plan is incomplete and your successful transition of wealth is at risk.

You have worked hard to achieve this level of success and you deserve to know your post-life goals will be fulfilled and legacy will be honored. Discuss this topic with your trusted Summit advisor if you haven’t recently done so and remember, we believe there is tremendous value in coordinating your advisor’s efforts with your attorney and accountant, so connect them.