Sudden change of any type is risky. When someone’s personal wealth circumstances change quickly, it can lead to all sorts of adverse and unintended consequences.
Here are some examples:
* after being drafted, sportsperson gets a huge contract
* winning the lottery – research shows most lose it
* entrepreneur sells business for huge gain
* ‘sudden’ inheritance
Specialist wealth managers have emerged to support people through such transitions. Once the shock subsides, recipients sometimes feel pangs of guilt. For entrepreneurs, a realised exit is often affirmation of their success, but inheritance can sometimes lead to feelings of unworthiness – “the inheritors dilemma”.
Younger people who advocate against inequality and then find themselves on the wrong side of that equation can feel shame and guilt.
Of all the examples, ‘sudden’ inheritance is the most easily avoided. After all, the only certain thing is death, and there is usually ample opportunity for parents to discuss family finances with future inheritors.
The lack of willingness of parents to discuss family finances and succession planning with the children usually comes from the politeness of not discussing money, or the fear of spoiling children. But the risks of not preparing heirs is just as bad or worse.
Consider This: Incumbent generation – what (if anything) have you done to prepare your children to be responsible heirs? Rising generation – do you feel sufficiently informed (to the extent this is possible) about the intergenerational wealth transition within your family? Both generations – talk more, not less!!
- How to manage sudden wealth, and avoid the pitfalls that may come with it
- Ten Ways to Talk About Family Wealth
- Q&A with Stacy Allred of Merrill Center for Family Wealth
- When And How To Tell Your Children About Wealth?
Here is more on reading on wealth management.