Changing the Odds of Wealth Transfer

By Noah Rosenfarb
Published: August 27, 2018 | Last updated: March 22, 2024
Key Takeaways

The odds are against high net worth families to properly transfer wealth between generations. Here are four ways to preserve family wealth.


There are a little more than 172,000 families in the United States that have a net worth in excess of $25 million. A majority of these families have built this wealth through the ownership, growth and sale of mid-market businesses. Unfortunately, research indicates that for 98% of these families, their great grandchildren will not see any of this wealth — it will be gone. This "shirtsleeves to shirtsleeves in three generations" phenomenon is primarily attributed to poor communication, a lack of trust among family members and unprepared heirs.


Here are four ways you can begin to thwart these issues and preserve your family wealth:

Host Family Gatherings

If you have three or four generations in your family and don’t already invite them to spend vacation time together, this is a great first step in building family identity and creating lasting memories. Family vacations may have often been spent at your vacation home, but seek destinations that provide a combination of easy travel for all family members, opportunities for fun activities and a relaxing atmosphere. Unfortunately for many families, the vacation home does not do all three of these things.


When hosting family gatherings, resist the urge to obligate your children and grandchildren to a structured regimen. Offer a schedule of things you will be doing/hosting. Provide advanced notice for where and when you will be eating meals, what activities you plan between mealtimes and what evening activities you are organizing. As your tradition matures, you may find it helpful to form committees to select the dates and location, to organize the schedule of activities and to infuse common family meeting topics of family mission, vision, values and governance.

Family Philanthropy

There are great ways to foster a tradition of giving among your family members and also to build certain skill sets among your next generation. One of the easiest ways to implement a family giving program is to provide each of your family members with their own donor advised fund (DAF). In simple terms, you make a donation to the DAF (and receive the benefit of the tax deduction), but your family gets to decide which organizations will receive donations. This is both simple and convenient.

Another strategy is to underwrite contest-style giving. Each child or grandchild presents to the family the charity they wish to support, their reasons why and the use of the donation. This can be done as an oral or written presentation (or both). After hearing all the options, family members vote on the most compelling gifts. Oftentimes, every presenter’s organization is given a minimum gift, while two or three of the chosen organizations receive larger gifts. This strategy does a few things well — it gets your family together to talk about giving to others, provides an opportunity for younger generations to learn oral and written presentation skills in a comfortable environment, and everyone learns the methods of how others choose organizations.


A great time to implement the "contest" is during a family gathering. Prior to leaving, make sure everyone knows the date and time presentations will occur. You may choose to begin the tradition of having the eldest present first, with the youngest presenting last or vice versa. Ask all family members to keep score of which charity they think is most deserving and have them submit their recommendations to you. At dinner during the vacation, announce the winners and be sure to have everyone start thinking about the charity they want to represent next year.

Creating a Family Bank

Although this may sound formal and fancy, implementing a family bank structure can be quite simple to start. Ideally, everyone in the family will come to recognize that your wealth can be utilized to support and reward positive behavior — not as a means to avoid hard work or self-discipline. The family bank would commonly fund education expenses, business ventures or opportunities to support family member goals.


The main distinction between gifting and family banking is accountability. Generally there is some type of application process (beyond a simple request) and a review process. Involve outside advisors and/or family members from other branches of the family in the decision making process. This is an obvious sign of creating an accountability culture in your family around requests for money. Commonly, there is also a repayment plan or objective so that the family bank can exist and perpetuate for future generations.

Investment Committee

Becoming an experienced investor is usually done through trial and error — and errors can be costly. By forming an investment committee, knowledge can be shared and transferred between generations in a supportive environment. More importantly, family members with deep knowledge within a specific arena can apply their skills to benefit the entire family. To form an investment committee requires two things: a pool of money or assets to be managed and a group of people willing to take on the responsibility.

The asset pool should be substantial enough to be taken seriously (no less than 10% of invested wealth) and that the matriarch and/or patriarch do not participate on the initial investment committee. Instead, one member of each branch of the family is asked to participate to get the process started (and having sons-in-law and daughters-in-law participate is a great practice). The family CFO/financial advisor and/or outside Chief Investment Officer/money manager should facilitate the meetings and design the agenda until a family member wants to take over.

Having an investment committee work together with your advisors does a few very positive things. First off, it builds a relationship between two important groups of people in your life. Second, it allows you to witness the level of care, attention and performance your family will dedicate to preserving and growing wealth. Based on the results, you may choose to increase the pool of assets the investment committee oversees, or you may determine that when you are no longer capable of managing the majority of your wealth yourself, your best course of action is to have paid professional advisors manage it for your family.


By implementing these concepts, your family will have a much greater chance of preserving wealth and developing a healthy and positive attitude for the role money can play in the lives of your children and future generations. Establish a goal for yourself to infuse one of these programs into your family and work with an advisor to make sure you are successful. Only good things will come from starting the process now.

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Written by Noah Rosenfarb

Noah Rosenfarb
Noah Rosenfarb, CPA/ABV/PFS has devoted his career to advising business owners on all things related to money. He is a Personal CFO and Holistic Wealth Coach at Freedom Business Advisors, which provides middle market business owners guidance on how to successfully transition out of the management and or ownership of their company. Mr. Rosenfarb is the author of EXIT: Healthy, Wealthy and Wise.

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