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Winning the Relay Race of Family Wealth Transfer

Family Wealth Transfer

TOO MANY grantors feel that just preparing the documents for the passing on of the wealth — such as setting up a trust — is the end of the process. But it’s really just the beginning because their inheritors need to be prepared to deal with the wealth.

Grantors need to share what they’ve learned about managing wealth. If they don’t, it’s like putting someone into a relay race with no coaching or training. They’ll be paralyzed, or they’ll stumble and fall, or they’ll be pushed off the track.

The way I like to describe wealth management and transfer is that it’s like running a relay race. This metaphor captures the process and the spirit in which we need to take on that process.

Looking at the relay race historically, the first runner is the one who initially created the family wealth. That may have happened some time ago in your family, or you may be that first runner. The baton represents the wealth itself. The other runners are the generations to whom that wealth will be passed.

If you’ve ever watched relay races, you know that passing the baton is often the trickiest part. Many of them get dropped, making it impossible for the team to win the race. But even if the passing of the baton is smooth, each runner must know how to make the most of their strengths and be passionate about how to run the race in order to advance the baton as successfully as possible. When you or anyone else in your family is running their leg of the wealth race — working with the wealth they’ve inherited — they need to know their strengths and be passionate about how they’re using the opportunity that this wealth provides.

In order to run a successful race, the teammates must help and support one another. The veteran runners must share their knowledge and provide support for the rookies. The rookies must be allowed to figure out what kind of approach to running their leg of the race will motivate and excite them and will keep them going when the running gets difficult.

Usually, teams need a coach to help them make the most of their potential. It’s the same way with managing and passing on wealth — the experienced wealth managers in the family, and the coach, must educate the inexperienced members of the family. And they must allow those rookies to figure out how they can best employ the wealth being passed on to them, not dictate to them how to do that.

So, that’s the overall metaphor for wealth management and transfer that I use, and now we’ll look at each aspect of the race more closely.

When you’re handed the baton to run your leg, you are a steward of your family’s wealth management. You have the opportunity to use, develop, and hopefully increase that wealth. Just like a runner needs coaching and training to deal with the challenges that come up during a relay race — weather conditions, the state of the track, the behavior of opponents — you will require support and guidance to succeed at handling your inherited wealth, either from experienced people from within your family or from professional family advisor outside of it, or both.

But, at the end of the day, it’s your responsibility — and your opportunity — to run that leg of the race in a way that’s personally fulfilling for you. At the same time, you should always keep in mind that the baton, your wealth, isn’t just yours; you’re part of a team — your family — and the baton will be passed on to others. So make the most of your time with that baton!

By inheriting wealth, you’re given a lead in life, and you’re also given the opportunity to extend that lead for the next generation. How do you measure that lead? Dollars and cents? Impact on society? Successful perpetuation of the family legacy? It’s usually some of all of these things, but when you get to the end of running your leg of the race, you’re meant to transition to helping those who come after you to run the next leg successfully, to optimize their performance, to help them think through and adjust to any adverse conditions they might encounter.

In the wealth management and transfer process, if someone drops the baton, gets nudged off the track, or gets tripped up, you can be there to support them — the way a veteran athlete helps a rookie — by saying things such as, “Look, you’re not using the best technique” or “Hey, I can show you how you lost your lead there” or “There are ways to ensure you don’t get nudged off track.” You can talk to them and help them along. (This is something the wealth management “coach” can do, too.)

Veterans of dealing with wealth can share what they’ve experienced with the next generation, provide perspective, help them develop their own plan, and monitor their progress. You can share both the responsibility and the success. Because, in the end, what you’re all aiming for is to get the whole family to the top of the podium, shaking hands and celebrating their victory.

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Leading Forum
Steve Braverman is a co-founder, former co-CEO, and now co-Chairman of Pathstone, an advisory firm to help clients create, manage, and preserve wealth across generations. His book, Your Time with the Baton – Winning the Relay Race of Family Wealth Stewardship (Advantage, March 7, 2023), shares how to embrace the opportunity of wealth management and transfer. Learn more at yourbatontime.com.

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