The Paradox of Wealth – Two Sides of the Coin

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9th Jan 2015

The Paradox of Wealth: Two Sides of the Coin

“Wealth is fine, oh so divine.”

It is possible to be so focused on wealth that this is the only side of the coin you see. If this is the side of the coin you see, then you simply need an estate plan that transfers wealth with the hope that the next generation will be able to hold it together.

The conversation surrounding assets, valuations, tax free rollovers, trusts, wills, shareholder agreements and other legal documents may be long and complex, but the conversation about family and values will be short. This is the usual estate plan which individuals view as being the norm: long on technical jargon but short on family and values.

“Wealth can hinder, hobble and destroy.”
If your focus is on family and values so this is the side of the coin you see, read on.

If you are concerned that wealth can hinder, hobble, or even destroy the family and its values, then you could donate your wealth to charitable causes. This is a simple method to avoid the “hinder, hobble and destroy” effect on: your descendants’ will to work; the opportunity to forge their self-identity; the core family values. There is nothing wrong with this approach as many people have made this very decision. Where you have come to realise that family and values are more important than money, this is one way to deal with wealth.

However, if you view wealth as a tool, then you can explore opportunities to support and further the family values, values like:

  • Balanced moral compass
  •  Strong work ethic or entrepreneurial spirit (like mother/father like daughter)
  •  Giving back to the community

Family continuity planning provides the opportunity for the family to explore alternate structures to utilise their wealth in a fashion that provides a venue to build on the core family values. It also allows the family to avoid the destruction that often arises when a person “wins the lottery” without first learning the responsibility that comes with holding and managing wealth. If it is truly family wealth, then each generation holding that wealth does so as the steward for the next generations.
For example:
If the concern is that the next generations do not fully understand the value of money, creating a charitable entity is a tool some families have utilized. By having family members engage in the planning, gifting and follow up on the charitable activities, family pride and identification with a common cause can be instilled. Seeing the positive effects arising from their planning choices that sometimes even small gifts have in the lives of others less fortunate can be a truly educational experience for families that have always had it all. This type of collaboration can also bring the greater family together: children, grandchildren, spouses and significant others, without having to include them all in the operation of the family business.

You may want to provide the opportunity for the family, in particular the younger generations, to develop their own entrepreneurial skills, without simply giving them the wealth to play with. The key here is to use the family wealth to provide an opportunity to learn rather than simply giving wealth. As one family put it: “provide enough money so that they can do something, but not so much that they do nothing”.
If you view wealth as a tool, the possibilities are only limited by the imagination.

If your focus is on family and values, and you view wealth as a tool which can be used to support and further develop the family values, let’s chat. kgsenda@petersonpurvislaw.ca

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