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Provided by the South African National Department of Health
Preparing for the
‘great wealth transfer’
A significant proportion of global wealth is owned by individuals who are close to or older than 60 years – it’s been estimated that more than US$30 trillion will be transferred from one generation to the next over the next few decades. There’s a saying in investment circles, however, that ‘the first generation makes the money, the second spends it, and the third wastes it’. How can wealthy families prepare for the smooth transfer of assets to their children to ensure their legacy continues for generations to come?
The old adage has certainly been borne out by recent research: survey results quoted in a 2013 Wall Street Journal article indicate that 70% of affluent families will lose their wealth by the second generation and 90% by the third. The 2016 Knight Frank Wealth Report found that family wealth is now typically squandered by the end of the second generation.
How and why does this happen? In our experience, there are several reasons why following generations end up failing as custodians or stewards of family wealth:
In our view, there are three key ways wealthy families can prepare to transfer wealth to the next generation:
Ensure everyone in the family has some level of financial education. Family members need to:
Engage all generations in a family indaba or gathering, in order to:
Put a support system of trusted advisers in place, and involve members of the next generation in meetings with the family advisers.
In practice, once they are comfortable with the idea of wealth management and investment concepts, members of the younger generation often bring new viewpoints, ideas and renewed energy to the table in discussions about family wealth.
It’s crucial that all members of the family work as a team and focus on a realistic, understandable goal that capitalises on the strength of the sum of the individual members.
Do you need assistance or more information on implementing any of the steps set out above? Call Marteen Michau on 011 778 6656 for an appointment or email marteenm@privatewealth.sanlam.co.za
The formation and registration of trusts, and the provision of independent trusteeships – both local and offshore.
The creation of BEE, charitable, special and Shariah trusts compliant with regulatory and legislative requirements.
The administration of deceased estates in South Africa and abroad.
Advice on complex structures, asset restructuring and bequests in foreign jurisdictions.
Advice on emigration and immigration, foreign earnings and the application of any double taxation agreements.
Updating trust deeds to ensure they’re in line with the latest changes in the trust environment.
Updating and/or drafting of wills dealing with South African and/or foreign assets.
Advice on the establishment and management of charitable organisations, their tax status and tax deductible donations.
Advice on the potential tax consequences and reporting obligations if you hold a US passport or green card, or if you have children living in the US.
Guidance on the financial implications of life-changing events, such as getting married, divorce or the birth of a child.
Expert advice is crucial in dealing with cross-border estate and tax planning.
Stanley Broun has spent 13 years in Fiduciary And Tax.
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