It sounds counterintuitive but words rather than numbers are likely to dictate the success of your family’s transfer of wealth. Most people turn to a financial advisor simply for a tax-efficient estate plan to ensure their heirs inherit as much as possible. But what good is that if the next generation are ill-equipped to deal with it, either because the money comes as a surprise or because they’re too entitled to handle such a windfall?

Crunching the numbers is table stakes but at Callan Wealth Management, we also help prepare your children and/or beneficiaries for the responsibility that comes with wealth. A lack of communication, transparency, shared family values, and gratitude can wipe out a fortune in one fell swoop. The adage “shirtsleeves to shirtsleeves in three generation”, which refers to the failure of grandchildren to manage the wealth passed down to them from their grandparents and parents, is much used for a reason.

The contrasting results of two families1 who accumulated riches in the 19th century highlight this issue. Take American Cornelius Vanderbilt, who left 95% of his estate to one son, and divided the rest among his eight daughters and his wife, leaving a tiny portion to charity. One sibling later killed herself as the dispute over the inheritance spiraled out of control, while the remaining Vanderbilts soon acquired a reputation for self-gratification and lavishness. While Cornelius was adept at the “two-legged stool” of estate and financial planning, he notably failed to prepare his heirs to handle one of the world’s biggest fortunes. When the Vanderbilt family held a reunion in 1973, there were no millionaires left.

Over in Europe, the Rothschild family built a similar fortune but the patriarch, Sir Nathan, was shrewd enough to add another leg to the planning model called Heritage Design, which readied the heirs to receive their inheritance. This philosophy included establishing family “banks” to lend money to, and monitor, those who wish to start businesses, while annual family gatherings clarified and communicated their collective vision for the future. Philanthropy was supported and, apparently, if a gathering was missed, that family member was locked out of the family bank. This unified approach has kept the family wealthy up to the present day.

The Rothschilds’ success bucks the trend. According to much-cited studies by Victor Preisser and Roy Williams in their book “Preparing Heirs”, almost 70% of wealth transfers fail, which is arguably more significant now than at any other time in history. Through 2045, parents of Boomers, and Boomers themselves, will pass down about US$84.4 trillion in assets, with US$72.6 trillion going directly to heirs, according to Cerulli and Associates2. This will change the lives of Millennials. Suddenly, having endured high real estate prices and recessions, they will have the ability to purchase homes, pay off student debt, travel, and buy high-end products. Having previously been sheltered from such money decisions, they will hold five times as much wealth as they do today by the 2030s3. Shirtsleeves to shirtsleeves perils abound.

Therefore, just as Sir Nathan Rothschild realized, your heirs don’t just need a financial plan, they need guidance and mentoring. Here are several ways you, working with an advisor, can help prepare them to manage your family inheritance.


Most of us don’t want to be reminded of our own mortality but putting off the conversation about what happens when you’re no longer around will not help anybody. Yet, this a common failing. So many people don’t discover a life-changing life insurance policy until they’re cleaning out their loved one’s bottom desk drawer. Share as much information as possible. It might not be an easy conversation but in the long run it will leave your family better prepared and minimize the risk of poor decisions during an emotionally challenging time.

The same rule applies to estate planning strategies. The last thing you want to do is land your heirs with a whopping tax bill or the costs involved in transferring a family business. An advisor can help educate the next generation on strategies like estate freezing or other ways to minimize capital gains or explain how a life insurance policy can help pay bills.

Family Goals

Getting the family round a table is not only important to share information and explain strategies but it’s also vital to establish something more intangible – shared goals and sense of purpose. What does the family believe in? What’s its vision for the future? Despite the endless media coverage of the markets and returns, most of the time this does not involve beating the S&P 500 or racking up a minimum 12% annual returns.

Instead, this might involve recognizing family history, understanding the origins of its wealth or respecting certain personal relationships. Some families, of course, have religious or cultural values and/or philanthropic areas it wants to continue to be involved in. There are also more prosaic goals like maintaining a certain standard of living or ensuring education costs for the grandchildren are taken care of.

Every family will have a different philosophy on wealth and there is no right or wrong answer. However, it’s important everyone is on the same page to ensure future decisions stay true to these values.

Show Some Gratitude

Wealth can shelter young people from critical life lessons and perspectives, which can give rise to a dangerous sense of entitlement. Teaching heirs the value of money, how to save and budget, and the skills and independence needed to contribute to society is important. There are many ways to do this, and each family will have a different approach, but encouraging your kids to earn their own money, pay for their own education or save for their gap year travelling, for example, can help instil these values and ensure family money is not taken for granted.

Many successful business leaders require their children to learn the ropes from the bottom up at the company, while others want to see they can “make it” in another profession, not only to teach self-sufficiency but also to show them how fortunate they are. Not every family will be able to do this, of course, but finding way to teach old-fashioned values like hard work and the value of money, married with an understanding they are also stewards, not owners, of their family’s wealth, can help engender a priceless sense of gratitude.

Learn Failure

All the above are designed to engage the next generation and prepare them for managing money. As Tom McCullough, CEO of Northwood Family Office in Toronto, Ontario, says, families who prepare the heirs for the money and the money for the heirs will stand a better chance of success. A big part of being able to handle wealth with grace and gratitude is by understanding the sacrifices that went into getting it in the first place. Real-life experience is, therefore, vital. Younger family members can work with an advisor to manage their money and join an investment committee, for example. Let them make portfolio choices so they know what it’s like to lose. Encourage a business venture - let them experience the trials and tribulations that involves. Failure is a part of life and will help them grow into a mature adult and a more responsible steward of wealth.

Sound estate and financial plans are paramount, of course, but the third leg of the wealth transfer – what the Rothschilds call Heritage Design – can make or break a family’s wealth transfer. Invest time in preparing and educating your heirs about family values and goals so when the time comes, they aren’t blindsided when wealth is under their control.