My Family Drives Me (Financially) Nuts

When it comes to money, families have a lot of issues to work out. And there's a lot at stake. It all starts with communication.

Family gatherings should be filled with excitement and fun, but have you ever arrived for the celebration only to find yourself feeling annoyed or frustrated, and ready to turn around and go right back home?

And then, throw in a little money on top of it all, like an inheritance, and the potential for hurt feelings and misunderstandings can skyrocket!

We all have the best intentions when it comes to family. We love each other, we want the best for one another, but we often don't know how to interact. We need to work on our family dynamics, defined as the "patterns and processes by which a family navigates change, growth, expectations and decisions surrounding their wealth, values and goals."

An example of good intentions gone awry

I had a client who set up a very small trust for her son when he was very young to vest when he turned 18. I asked her, "What have you told him? How have you prepared him?" She had no idea nor thought of the potential impact her decision might have. She did not think her well-intended, tax-savvy move could turn into something with the potential ramifications of a teenager coming into a massive sum of money.

This windfall reminds us reminds us that real people will be impacted with every financial and non-financial decision we make. In this example, my client still had options - the option to talk, to share her hopes and dreams for the future, and to work with him to transparently and openly bring him into the hold while helping to prepare him for a bright future.

Where families go wrong by not being intentional

You may have heard about a 1987 study that showed 70% of wealth dissipates by the third generation. This research pointed to three main causes:

1. a lack of communication and trust

2. a lack of preparation of heirs

3. not having a family mission statement

So where do families go wrong? It may sound odd, but by not being intentional with their own families. For example, in the business world, we are typically very intentional about having a clear set of values, a vision, and a mission. We seek to develop leadership skills in our top employees. We look to create an environment with clear communication. Why are we not as intentional with our own families?

Another study, conducted by my friend and colleague, Dennis Jaffe, points to what "enterprising families" are doing right. My overview of Dennis' findings amount to this...it's not so much what families are not doing, it is what they ARE doing, and doing intentionally and proactively.

What it means to be an "enterprising family"

So, what are families doing to succeed?

1. They create a great business first and then subsequently decide to become a great family as well - the latter takes more work and time

2. They developed not just their financial capital, but their human capital as well

3. They took steps to cultivate and grow through communication, education, and clear methods of decision-making (governance)

4. Their actions are values-based

5. They respect their legacy and core values which are continually adapting and changing

6. They adopted an owner's mindset

Do you see anything on this list that points to financial decisions, tax minimization, or estate planning? No, but in reality most of us tend to spend a lot of time getting those right. Don't get me wrong, these are all very important pieces to financial success, but it is overwhelming clear that what matters most are the people we care about and HOW our decisions will impact them.

How families can get on the right track

Families know it can be difficult to work together in new ways. Often, they get even stuck and don't move forward, all while knowing how much the work would impact their family in a positive way.

Things are are worth doing are hard. Ask yourself: What possibilities could you transform into realities if each family member could clearly articulate their values and a defined vision and mission for themselves? What if you then worked together to create a set of shared family values, vision and mission for your family? What possibilities could you transform into realities if you then used your shared purpose to strengthen family communication and cohesion, and to develop the personal and leadership capabilities of individual family members?

The possibilities are yours to decide.

What comes next

Want to learn more? Join me! Throughout my blog series, I will lay out key concepts designed to help your family create a framework in approaching Family Dynamics. During our journey together, we will explore:

1. What is an Enterprising Family, and how do we work toward becoming one?

2. How can we transform into a cohesive family? Understanding families as complex emotional systems.

3. Naming the unique complexities of families of financial wealth and learning how to navigate them.

4. Embracing the multiple dimensions of wealth, or “family capital,” rather than seeing wealth as financially oriented only.

Until then....

Katherine Dean

Founder & CEO