Bench Talk: Wealth Transition Troubles

We’re currently in the greatest transfer of wealth that history has ever seen. Anywhere from 60 trillion to 120 trillion dollars will change hands between 1998 and the year 2050. However, this great transfer of wealth is not just a problem for the wealthy. Even the average middle-class family has a lot of assets that will need to be transferred over to the next generation. If you tally everything up, even the average middle-class family is looking at a transferable estate of anywhere between $200,000 to $1,000,000. These are serious assets that need to be transferred correctly. So now we have to ask ourselves, is the transition process being done well? Well the answer is, no. The criteria for transferring wealth has historically been how to move money from point A to point B but there are more factors that need to considered:

1. Does the process cause fractures or strife in the family?
2. Will the money be used productively, or will it be wasted?
3. Do the receiving heirs feel blessed to receive the money or guilty?

Now MIT did a study a while back and found that 70% of these cases found out that the answer to our question was also no. We are failing at transferring these assets correctly. Over the years, professionals have found many ways to mechanically be successful at transferring wealth using tax laws, trusts, insurance products, etc. The reason behind the 70% failure rate has nothing to do with the mechanics. The problem lies with not correctly preparing the family for the transition process.