When steamboat and railroad magnate Cornelius Vanderbilt died in 1877, he left an estate worth an estimated $200 billion in today's dollars. Less than 50 years later, most of it was gone. Contemporary media accounts of lavish spending by some of Vanderbilt's heirs helped popularize the perception that family wealth tends to dissipate with each successive generation.
Of course, this narrative is far from inevitable. But with U.S. households projected to transfer $124 trillion to heirs and charity over the next two decades, it's also worth asking: How can you help ensure a legacy for your kids but also their kids and beyond? That's where a family wealth mission statement comes into play.
Going the distance
For a legacy to endure, families need to engage in a deep discussion about shared values, vision, and purpose. Most wealth transfer challenges stem from a lack of communication within the family.
A wealth mission statement is a document that addresses this issue by laying out a family's values and vision for its wealth. It's neither legally binding nor enforceable, but it serves as a North Star each generation of a family can use to orient themselves as they become inheritors and custodians of the family's legacy. It's about sitting down together and saying, "We represent ourselves as a family and we want to make sure our wealth helps rather hinders our heirs."
With that in mind, here's a three-step plan for creating a family wealth mission statement, no matter the size of your estate.
Step 1. Find your common purpose
Cornelius Vanderbilt expected his heirs to manage, if not expand, the business empire he built. Initially, they did. Then as the years passed, later generations divided the family's holdings—selling off their stock or stepping away from business roles—as they pursued their pet passions, from living large to philanthropy.
Now, the Vanderbilts are an extreme case. But it's nevertheless reasonable for a family to want its estate to pass on to future generations.
The origin story of a family's wealth can be a captivating starting point for younger family members. Knowing where it came from—highlighting the challenges, successes, and determination—helps foster an appreciation for the achievement of wealth creation and a sense of stewardship surrounding its future use.
This is also an opportunity for family members to examine their attitudes and beliefs about money, not just the How did we get here? but also What do we want to accomplish together? The idea is to gain a fuller understanding of the meaning of money and how best to use it to match your values, priorities, and personal and family goals.
How should the family build and grow its wealth? Is philanthropy an objective? What are acceptable behaviors between family members? You want to cultivate an atmosphere of open communication in which your family talks about its history, beliefs, values and responsibilities. This discovery phase is key to building consensus and a shared sense of purpose.
While conversations about death and money can be intimidating for parents and grandparents, an experienced professional such as a wealth advisor or an attorney can help, providing talking points and prompts, and even moderating the discussion.
Step 2. Put your plan into action
Once everyone in the family has agreed on their shared values and vision, it's time to write a mission statement that outlines the family's commitments. The document can be as simple or as complex as you see fit, but generally it should reflect your family's shared purpose and provide guidance for future generations, such as prioritizing education or donating a certain percentage annually to charity.
To streamline the process, you might consider selecting a family member or professional to draft the document after gathering everyone's input, and then share it with the relevant stakeholders to approve it. Despite the nonbinding aspect of the mission statement, some families find that physically signing the document can be meaningful act of enshrinement.
Every member of the family should receive a copy, and the original can be prominently displayed or simply filed with other estate planning documents. It may not be binding, but estate planners and trustees often use mission statements as a way to construe vision, values, and intent.
Step 3. Keep talking
As with all forms of estate planning, creating a family wealth mission statement isn't a one-and-done exercise. Children become adults, families expand, and priorities shift, so it's important to revisit your mission statement every few years or whenever there are major changes in your family's situation.
The process of creating and maintaining the document is itself perhaps the greatest potential guarantor of family harmony and a lasting legacy. It literally gets everyone involved on the same page and helps avoid conflict and confusion down the road.
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This material is intended for general informational purposes only. This should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decisions.
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