Transferring wealth: How to prepare the next generation | Family Matters by Tony Layton


In the coming years, an estimated 400 billion
dollars will transfer from one generation of Canadians to the next. Unfortunately, research indicates many of
these transfers will not go smoothly. Too often, there will be family disputes,
poor financial decisions and squandered wealth. That’s why it’s so important to plan the
transfer of wealth by preparing the next generation to manage it. I’m Tony Layton, and in this episode of
Family Matters, I talk about how to prepare your family’s next generation for the transfer
of wealth. Money is a difficult subject to talk about
in a family. So, you won’t be surprised to hear that
many put off the discussion. In some cases, the younger generation is surprised
when they learn the magnitude of the wealth they will be inheriting, and unprepared for
the duties and responsibilities that go with it. That’s not a healthy situation. As hard as it may be, it’s absolutely essential
to lay the groundwork for a smooth and harmonious transfer, to begin as early as possible. You can start when the next generation are
still children. Kids can be taught the importance of hard
work, saving and sharing with others. As they reach adulthood, you can begin teaching
them about handling your family’s wealth responsibly. This should involve both financial education
and a transfer of knowledge within the family. For the younger generation, there are many
things to learn. They will need to understand:
First – How to manage their personal finances through prudent spending, saving and budgeting; Second – the principles of intelligent investing; and Third – how to manage and protect wealth through such things as tax strategies, insurance and
wills. They will also need a clear picture of your
family’s financial landscape. Where is the family’s wealth and how is
it administered? This will lead them into such areas as business
management, tax and estate planning, and charitable giving. Again, there are many areas to be potentially
explored. For example, are there one or more operating
companies? Are there holding companies? How about trusts or a charitable foundation? How does each function? While not all your children will have the
same level of interest, going through the learning process should make them feel more
involved and confident about their role as future stewards of your family’s legacy. Identifying who in the younger generation
will play a leading role in managing the family’s affairs can be a particularly sensitive issue. There are many potential conflicts that must
be worked through. These include:
competition among the heirs questions arising from divorce and blended
families and what to do about children who are unfit
for one reason or another to manage an inheritance. You might be surprised to find that the person
you assumed would lead the family – isn’t interested at all. So, where to start? A family meeting is usually the best place. Getting your family members together for an
open discussion is an opportunity for everyone to explore the various issues and come up
with an action plan for the future. The meeting doesn’t have to be too formal,
but it’s a good idea to have some structure to facilitate focused and constructive discussion. This means an agenda and a chairperson. It’s important for each person to come as
prepared as possible. What vision and values should guide the family
in the future? What issues do you see and how do you propose
to deal with them? Here, a trusted advisor can be invaluable
in bringing the family together and acting as a guide, resource and referee, as necessary. There’s no doubt these can be tough conversations. But delaying them, won’t make them go away,
and will likely make them worse. Open communication is essential and should
be an ongoing process over the course of years. The good news is that working through issues
and preparing the next generation will give your family the best chance of flourishing
for years and decades to come. Family matters is a series all about helping
you preserve and build your family’s wealth. Do you have any questions or comments? Please leave them below. I’m Tony Layton and this is Family Matters. Don’t forget to subscribe and click the
bell to be notified when I release new videos. And if you’re watching this on LinkedIn Follow me to stay in touch.

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