As vast sums of wealth prepare to change hands in coming decades, families face the delicate task of managing inheritance and succession thoughtfully. A June report by UBS forecasts a monumental $74 trillion intergenerational wealth transfer within the next 25 years. Within this overall transfer, ultrawealthy segments, including billionaires, are set to pass down $5.9 trillion by 2040, according to UBS's December analysis focusing on this group. This scale marks the largest transfer of wealth ever witnessed and carries with it complex family dynamics and high expectations.
UBS's survey of billionaires reveals that 82% wish for their children to develop the skills and values necessary for independent success. Meanwhile, 61% express hope that their heirs will be comfortable and capable of managing the family's wealth effectively. Richard Orlando, founder of Legacy Capitals, a consultancy specializing in guidance for affluent families and family offices, works extensively to facilitate these transitions. His focus is on educating families, formalizing plans around succession, investment strategy, philanthropy, and crucially, inheritance management.
While greater wealth often entails increased complexity, Orlando emphasizes that the lessons from these experiences are broadly applicable. The clients his firm serves have net worths ranging from $20 million to $3.5 billion, yet he notes that all families benefit from conscious and deliberate approaches to wealth transfer. Intentional efforts to convey family values, educate younger generations, and prepare successors typically lead to more favorable outcomes, regardless of the amount at stake.
Orlando identifies three common errors in managing inheritance and outlines corrective measures based on his professional experience.
1. Avoiding Money Conversations Creates Vulnerability
A common mistake among affluent families is avoiding discussions about money with children, driven by concerns over fostering entitlement. Orlando cautions this approach leaves heirs ill-prepared for financial stewardship until the moment of inheritance, effectively creating a 'lottery winner' scenario where sudden wealth arrives without prior knowledge or readiness.
He advocates for incremental transparency rather than abrupt disclosure. Families need not reveal detailed financial statements but should gradually share relevant information. Orlando cites a client example where parents intended to leave $100 million to each child. Previously, the children had been financially independent with no awareness of the forthcoming inheritance magnitude.
To mitigate shock and promote skill development, Orlando advised these parents to allocate $5 million into wealth management accounts for each heir before the full transfer. This strategy allows the children to gain financial management experience in a measured way, preparing them effectively for larger responsibilities.
2. Lack of Structured Planning Can Fuel Conflicts
Many of Orlando's engagements focus on establishing comprehensive family policies encompassing communications, investment oversight, and philanthropic goals. Especially when family wealth includes business ownership or charitable foundations, explicit discussions about succession and stewardship are critical.
Differences in generational perspectives can emerge, such as between a conservative grandparent and a grandchild with contrasting philanthropic priorities. Orlando's recommendation in these instances is to seek mutual understanding and align on a limited set of shared charitable causes, integrating these into a formal philanthropy mission statement. This clarity on intent provides a framework that helps reduce disputes down the line.
3. Overcontrol Impedes Development of Successors
The UBS survey indicates that 43% of billionaires hope their offspring will expand and steward the family enterprise and related assets, preserving the family legacy. Yet, high expectations often collide with challenges of preparation and trust.
Orlando describes cases where patriarchs or matriarchs tightly controlled business decisions, leaving younger generations unprepared and disenfranchised. Such dynamics mirror the fictional depiction in the series "Succession," where family leaders disparage heirs’ seriousness.
To counteract this, Orlando advises gradual transfer of authority through delegating projects with manageable risk and allowing heirs to express and act on opinions. This progression from merely having a voice to possessing voting power fosters leadership capabilities and confidence over time.
Managing large-scale inheritance and family legacies demands open communication, clearly defined plans, and balanced empowerment of new generation leaders. Families who implement these principles benefit from smoother transitions and preservation of wealth across generations.