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How To Prepare The Next Generation To Receive Family Wealth

January 2020

By: David Thatcher, CFP®

At what age did you allow your children to drive your car? Have you even reached that point yet? Most parents aren’t eager to hand over the keys to their newly licensed drivers. They would rather buy their kids a car than trust them behind the wheel of their personal vehicle. It’s understandable. Teenagers lack the experience, wisdom, and the sense of responsibility it takes to maintain a nice vehicle.

Now, are you ready to hand over your wealth to your children? Your life savings is likely more valuable to you than your car, but are you taking the same precautions as you did with your young driver? The sad truth is that while Drivers Ed is mandatory, many people have received no preparation whatsoever to inherit their family’s wealth. Here are three areas to focus on as you consider passing your family’s wealth to the next generation.

Financial Literacy

Only 57% of American adults are financially literate, according to Standard & Poor’s Global Financial Literacy Survey. Another study found that less than one-third of American adults were able to correctly answer three simple questions related to inflation, compounding interest, and risk diversification. (*1) Though we are the richest country in the world, most Americans simply do not have the basic knowledge to manage their finances successfully.

You should ensure that the next generation of your family knows how wealth works and what to do with it before you place wealth into their hands. Managing wealth is no easy task. It is even more challenging when coupled with the trauma of losing one’s parents. If your heirs are not financially literate, that combination could be devastating. Taking the time to make sure that the next generation is financially literate is just as important in wealth preservation as the very best tax and investment strategies.


When it comes to money management, knowledge is only half of the equation. The other half is behavior. Even if he has a high level of financial literacy, do you trust that your son would handle receiving several million dollars on his 18th birthday responsibly? Is your daughter mature enough to put the needs of future generations ahead of her own current desires?

Many family legacies are lost in the second generation because of a lack of fitness to handle wealth. It is imperative that you make sure that your heirs are capable of handling the legacy that you plan to pass on to them. Even if you trust that your heirs are prepared for the responsibility of managing your wealth, remember that it will be coming to them at a very emotional and difficult time of transition in their lives. They will not be at their best; in fact, they will be in a very vulnerable state.


Knowing that your wealth will transfer during a difficult time for your heirs, it is important to be proactive and have proper protections in place. You don’t want to only protect your wealth from the irresponsibility or ignorance of your heirs, but also to protect your heirs from the possible negative effects of receiving sudden wealth. Wealth is a great blessing, but it can also ruin individuals and destroy families. It is important to proactively put safeguards in place so that your legacy strengthens your family up instead of tearing it apart.

Trusts and other financial and estate planning tools are commonly used to protect family legacies. Another way is to give your heirs the tools that they need to manage your wealth for their own betterment. Provide them with a good financial education. Let them know what you want so that there is no doubt in their minds about what they should do once they take over the reins. Put them in the hands of a trusted financial advisor who not only understands the technical details of wealth management but your own personal situation and family dynamics.

How We Can Help

Here at Cypress Wealth Services, we don’t just serve individuals, we serve families. Not only do we want to make sure that your wealth provides you with the retirement that you desire, but beyond that, we want to see it provide a lasting legacy for your family.

We want to partner with your entire family to ensure smooth generational transitions and wise wealth management. If you don’t think your heirs are prepared to handle your wealth, we can help with that. We can teach them what they need to know about money and develop a relationship with them so that they have a trusted professional to turn to when everything is in their hands. To learn more about how we can help your entire family, contact one of our offices today.


About Cypress Wealth Services

Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services is uniquely qualified to serve a broad range of client needs, and their experience and expertise act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, CA, Tustin, CA, and Anchorage, AK, the firm serves clients across the country in Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit or call 760.834.7250.