Riches to Rags in Three Generations
Posted on March 6, 2019
Provided by The
Trust’s Company’s Family Office Services
We’ve all met entrepreneurs who have built a successful
business and then sold it or left it to their children, so their families can reap
the rewards of a lifetime of hard work. No doubt, these business owners envision
leaving a legacy to their heirs that will last for several generations. But,
dating as far back as biblical times, the tale of riches to rags in three
generations highlights how difficult it can be to make inherited money last.
Usually, a business is most productive and successful while
the founder is alive and involved. But
by failing to take time to share information with their family about the
business during their lifetimes, founders often leave their heirs without an
understanding or appreciation of the values of hard work and thrift that made
the business thrive. In addition, flawed estate plans can fail to adequately
define who exactly will inherit the wealth and how it will be protected and controlled.
These very issues have extinguished great wealth in short periods of time.
Today, sobering statistics continue to show that the
children and grandchildren of their fortune-building parents will lose 65% of
the wealth in the next generation and 90% by the following generation.
Contributing factors can include taxation, divorce and marital claims,
misappropriation, mismanagement and family strife. But often, it boils down to
the negative personal effects of inherited wealth. Second and third generations
often inherit without critical prior guidance about the purpose and objective
of money. Seldom do they take the time to understand the values that created
their inheritance in the first place, values that are essential to maintaining
a healthy relationship with their newly obtained wealth.
But there is hope. An estate planning attorney is a vital member
of the high net-worth business owner’s advisory team – often found within a
family office group. It is the attorney’s responsibility to create the
documents that will protect the wealth from taxation and destruction from
creditors, spendthrift heirs, matrimonial claims, and future legal assertions. Of
equal importance, the estate attorney assists siblings in creating “family
governance,” a means of regulating the involvement of the entire family
structure that highlights the vision of the “founder” and the original wishes of
how this wealth should benefit heirs in the future. Ultimately, the plan must
ensure that the wealth is protected, properly managed, and that the family
members will lead healthy, happy and meaningful lives for generations to come.
A key planning tool being utilized today by high net-worth
business owners is the use of a Family Office Services group. These advisory team
members have the cumulative expertise to assist the founders in establishing
and executing proper succession planning, family governance, investment
management, estate and tax planning, family foundations and other philanthropic
designs for their future heirs.
History has taught us that it is hard to create wealth,
harder to keep it, and hardest to give it away prudently. As King Solomon
warned, “An inheritance gained hastily in the beginning, will not be blessed in
Visit www.tampabaytrustcompany.com for more information
on Family Office Services under SERVICES or call 813.915.6202 to speak with an
The Tampa Bay Trust Company
The Tampa Bay Trust Company and The
Naples Trust Company are divisions of The Sanibel Captiva Trust Company of
Sanibel, Florida; an independent firm with $2 billion in assets under
management that provides family office and wealth management services,
including investment management, trust administration and financial counsel to
high net worth individuals, families, businesses, foundations and endowments.
Founded in 2001 as a state-chartered independent trust company, the firm is
focused on wealth management services that are absolute-return oriented and performance
driven. Each portfolio is separately managed and customized specifically to the
client’s yield and cash-flow requirements.
Offices in Sanibel-Captiva, Naples, Tampa Bay, Belleair-Clearwater and
Tampa’s coastal communities. www.tampabaytrustcompany.com
LEGAL, INVESTMENT AND TAX NOTICE: This information is not intended to be and should not be treated as legal advice, investment advice or tax advice. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel.