Next Generation Engagement for Family Wealth Planning

Melissa Olszak, CFP®, CFA® BY: Melissa Olszak, CFP®, CFA® 06.24.19

An Important Step in Preserving Your Legacy

As families work on their estate plans and focus on sophisticated tax minimization strategies to transfer wealth, there is a factor that can be overlooked as it isn’t necessarily written down anywhere – having healthy relationships and engagement with the next generation.

Next generation engagement isn’t necessarily going to save taxes, but it’s critical in having a lasting legacy through more than just one or two generations. 

For many first-generation wealth families, this part of their planning can be harder to tackle – it’s easier and more comfortable to look at investments, understand tax strategies, make decisions and execute than it can be to define what success really looks like for the family and focus on the steps that will support that success. 

Defining Purpose

A first step in trying to address this softer side of planning is generally to define the purpose for your family’s wealth. A few questions that can be asked include:

Depending on family schedules, it can be difficult to find uninterrupted time for conversation, so the idea is to seize this time whenever possible, whether that be at the dining room table or in the car. The higher the level of communication and focus on acknowledging and addressing these questions, the higher the chance that your family will meet its objectives.


After spending some time answering the challenging questions above, the next step is to give some consideration to a strategy that will support the objectives for your family. Depending on the goal(s) discussed above, it is likely that a number of different strategies may be used.

Here are some important considerations that can play a big role in how wealth is spent, treated and distributed from one generation to the next.

Family Mission Statements. Similar to how companies state their mission and use it to guide decision making, families can do the same thing. Depending on the ages of the next generation, they could be a part of creating a family mission statement. The mission statement should lay out what your family values are and how they want their lives to be shaped in support of those values. The good news is that there are lots of resources on the internet or in books with examples from other families.

Family History. Studies have shown that the more the prior generation shares the family history of where the wealth came from and how it was accomplished, the greater the connection and responsibility the next generation feels towards it. 

Spending Priorities. Overlaid with this history, families that have significant wealth and can “buy anything” can talk with their children (even at early ages) about what goes into the decision making around what they buy and what they don’t.  For example, a family may value experiences, so spend a lot on travel; whereas they are less interested in material acquisitions so do not buy the most expensive car available.

Future Planning. Finally, families should be clear about setting expectations for a child’s future financial situation. This plan can be clear on whether the child is expected to go college, earn a living for themselves (with or without assistance from trusts), or have a prenuptial agreement prior to getting married. All of these conversations are a lot easier to have well before the actual time arrives.

Family Education. Custom outlines for families can be developed with their advisors or within the family to help teach the next generation the fundamentals of what they will need to know as they enter the financial world on their own – budgeting, investing, trusts, taxes, and more. These classes can be done one-on-one with the family’s advisors and the next generation and parents can choose whether to participate. 

Engaging the Next Generation. Getting (and keeping) the next generation interested and engaged in wealth considerations is very doable, and when approached correctly, can significantly benefit their outlook on wealth and financial responsibility. While talking about family trusts may seem fraught with emotional baggage, a beginning step may be to bring the next generation into discussions around philanthropy, which will expose them to many of the same types of information and considerations with less distraction of self-interest or control. 

The Art of Forgiveness. Regardless of the level of wealth one has grown up with, everyone has learned valuable financial lessons by making some mistakes. It’s important to give the next generation room to learn and make mistakes, and allow them some control and decision-making authority (with the appropriate natural ramifications) over a relatively small amount of assets as a starting point. 

A few examples might be:

Execution of Strategy

After the strategy is outlined, then comes actual execution – booking meetings with the next generation, giving them real decision-making authority, and checking in on their progress. It is an iterative process that requires initial steps, learning by all parties, and openness. 

External Resources

Even though next-generation engagement can be a challenging part of your financial planning process, the good news is there are many outside resources that can be used as references and support.  

At Lake Street, we think that defining family purpose and setting strategy and execution are critical steps that should be taken as part of overall financial planning for the family.

Focusing on the technical items alone (trust documents, tax planning, and investment planning) only tells half of the story. The other important half is putting some thought and work into having healthy family relationships and supporting communication and engagement with the next generation and beyond.   

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