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Addressing the Challenges of Giving–and Receiving–Family Wealth

This article was selected for you by Brian Stallcop, CFP®

Key Takeaways

  • Lack of financial knowledge and feelings of guilt can fuel anxiety among inheritors.
  • Parents and grandparents worry about giving too much money to their heirs.
  • Potential solutions include working with trusted pros and taking an active role in wealth stewardship.
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While most people would agree that having money is better than not having money, the Super Rich tend to understand an important lesson: Wealth itself doesn’t guarantee a smooth, happy or successful path.

That can be particularly true among those of us who inherit family wealth. Inheritors often face a number of significant challenges at various points in their lives—including the years before they receive their inheritance as well as after wealth is transferred to them.

With that in mind, here’s a look at some of the issues and hurdles that inheritors of significant wealth may need to overcome—along with strategies aimed at addressing them successfully.

This information is important for members of the older generation who will be transferring the wealth to their heirs, as well as for younger family members who will be taking control of those assets someday. By acting now and working together, your family could potentially be better able to avoid pitfalls that some inheritors find themselves in—and more effectively deal with the concerns that do arise down the road.

Anxiety around inheritances

Affluent parents and grandparents often worry about the potential negative impacts of
giving significant wealth to their kids. One survey, for example, found that almost 70% of
high net worth individuals were concerned about leaving too much money for their heirs—because doing so might make the inheritors lazy or irresponsible.

Additionally, the inheritors themselves can feel overwhelmed by sudden or unexpected
wealth—particularly if their “good fortune” resulted from the death of someone they loved dearly. Siblings, friends and even strangers can become sources of stress after people find themselves possessing considerable wealth.

Some key challenges to address

The first step to navigating wealth transfer among family is to recognize the challenges that inheritors are likely to face so you can be on the lookout for them—whether you’re the giver or the receiver of assets. While every affluent family has its unique characteristics, there are a few challenges that we see cropping up repeatedly among inheritors of wealth.

Challenge: Lack of financial knowledge

Inheritors and would-be inheritors too often don’t have a handle on what their specific inheritance consists of as well as on basic concepts of investment and financial management. In short, they don’t know much about their own money or about money generally. This lack of knowledge presents several potentially big problems. For one, they can feel disconnected from their own wealth—seeing it as not really theirs, or viewing it abstractly as something that’s simply always there for the taking. What’s more, they may be more susceptible to making poor decisions with their money—or being cheated out of it by unscrupulous people seeking to take advantage.

As you’ll see, sometimes this ignorance results from how older generations have
communicated (or not communicated) about wealth with the inheritors over time. Sometimes it stems from the inheritors, who for various reasons actually seek to distance themselves from the responsibility of money they feel uncomfortable about in some way.

Challenge: Bad spending habits

This goes beyond the obvious hedonistic overspending of inherited money that turns an ocean of wealth into a puddle (although that’s certainly a trap inheritors fall into). Poor spending also entails using wealth in ways that fail to generate the results people most want from their spending—which often includes greater happiness and pleasure, or a more meaningful life. Regardless of whether they spend a ton or not much at all, the feeling of emptiness that can occur when they realize their spending isn’t meaningfully improving their lives can be a rude awakening.

Challenge: Feelings of guilt and low self-esteem

The issues of entitlement and believing you deserve something that was unearned are well-known concerns when it comes to generational wealth. But it’s also common to find inheritors saddled with a sense of guilt or anxiety about money that’s given to them. Sometimes these feelings stem from inheritors not having a clear, strong sense of who they are and their place in the world prior to receiving assets. These inheritors often feel like they’re defined by money and affluence they did little to deserve—leading to the classic “impostor syndrome” condition of feeling that they now live in a world in which they don’t really belong. If their new wealth largely defines them, they can become extremely nervous about losing that wealth—which in turn can fuel feelings of mistrust in their own abilities and in the people around them.

Challenge: Pressure to have a lasting positive impact

Having wealth can give us a great opportunity to help others, of course—from the people we know and love most to complete strangers. But that opportunity to be a good steward of the wealth we receive can sometimes feel like a burden if the inheritor feels a great deal of pressure to help coupled with uncertainty about the “right” or “best” way to offer financial resources and support. Another component of wealth stewardship is making sure that wealth grows and is preserved for the future. For some inheritors—who, again, may have little financial savvy but much guilt about their inheritance—the pressure to ensure that assets they did nothing to build are there for others long after they’re gone can be immense.

Strategies to consider

The good news: There are ways to address and overcome these (and other) challenges that inheritors often face. Some of the strategies that Super Rich families find particularly valuable, in our experience, include the following:

Strategy: Build and hone financial decision-making skills.

Chances are an advisor or wealth manager will be involved in managing inherited wealth. Even so, inheritors themselves need to develop some big-picture financial knowledge and an overall sense of ownership of their wealth and decisions around it. Parents and grandparents can impart knowledge about saving, spending and investing—ideally starting from when their kids are in elementary school. Heirs can also take a number of steps, such as signing up for classes in high school and college that teach key financial basics.

One specific area of focus to consider is the relationship between money and meaning. Encourage heirs to pursue a lifestyle that speaks to their values—both their family’s and their own. Once they get clarity on this, a financial plan can be built around such values.

Strategy: Build an identity for yourself.

When you’ve got nothing in your life but your wealth, that wealth will define you. Inheritors—ideally well before they receive assets—should be allowed and encouraged to pursue a life that includes dealing with challenges, exploring their interests, discovering what they’re capable of and sacrificing in some way. Working, volunteering and other “real life” experiences build confidence, identity and self-esteem that can potentially help inheritors avoid feelings of unworthiness or isolation later on.

Strategy: Work with trusted pros.

While it’s important for inheritors to have a strong sense of self, as noted above, that doesn’t necessarily mean throwing out the bulk of their connections to the past. Case in point: Inheritors often switch advisors once they receive their windfalls, in part because they want to strike out on their own independently of how their parents did things. However, a family’s existing team of professionals often know the family’s history and values on a deep level.

If heirs have been brought into the wealth management process over time, those advisors often know a great deal about the inheritors, too. If inheritors seek out new, unfamiliar professionals, they will need to vet those professionals carefully—which they may not know how to do effectively. In short, don’t rule out finding new pros to work with—but don’t take that step recklessly or automatically.

Strategy: Share challenges with peers and others.

In our experience, inheritors will admit that their wealth creates feelings of isolation and
loneliness in them. Their affluence can make it hard for them to relate to or bond with
others they encounter in their lives—especially if those people have far less wealth. But such alienation can also occur between inheritors who are very much alike. When families overemphasize privacy concerns or tell their children to hide their fears and concerns from others, it can stunt important social and emotional connections to others that we all need. That, in turn, can potentially lead to depression, substance abuse and other life-altering problems.

Therefore, inheritors—and indeed, entire affluent families—need opportunities to
communicate, commiserate and share with one another. Being open about both the pros and cons of inherited wealth allows inheritors to see that they’re not alone in how they feel or view their situations. Given that the former surgeon general has called loneliness a public health crisis, it stands to reason that the less alone inheritors feel, the less likely they are to fall into behaviors that hurt themselves, their wealth or both.

Strategy: Be an active steward of wealth.

Stewardship is a buzzword that many wealthy families use but don’t often act on. While it can mean passively sustaining family wealth and status over time, it can—and some say should—instill and further values such as entrepreneurship and active wealth creation in heirs. By encouraging entrepreneurship and engaging in it, families can potentially reduce the risk that heirs will become defined by their inheritance or become unmotivated to pursue their own accomplishments in life. Active wealth stewardship can and does take many forms—such as leaders of a family-owned business bringing heirs up through the ranks of the company, or matriarchs and patriarchs lending money to heirs for business ideas via a “family bank” structure.


Ultimately, family wealth can be a resource to generate amazing good—just as it can be used in ways that lead to personal stagnation or worse. Givers and receivers of such wealth should put their heads together and work collaboratively to help ensure it’s the former, not the latter.

ACKNOWLEDGMENT: This report was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families, and is distributed with its permission. Copyright 2023 by AES Nation, LLC.


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