7 Ways Rich Families Keep Wealth Across Generations, Explained

Intro

Up to 66% of the wealthiest fifth report receiving inheritances or gifts. Seven ways rich families keep wealth across generations, explained: what each one is, how it works, the first step, and its limit. That figure comes from an international organization's report. Number seven shows how lifetime gifts work.

Every step comes from an official page, linked in the description. Henry only points at what those pages show. Number one: a written will, kept up to date.

1. A written will, kept up to date

What it is, in one government's words: a will lets you decide what happens to your money, property and possessions. Without a will, that guide says, the law decides who gets what. In large, wealthy business families, an international finance organization's handbook says a family office advises on estate planning. How it works: the will names the people who benefit, and an executor who carries out your wishes.

A government health agency's checklist adds that a will says how the estate is distributed and managed. The first step, from the guide's own list: write down who you want to benefit from the will. The list then covers who looks after children who are not yet adults, and who the executor is. The last item on that list is what happens if a beneficiary dies before you.

The guide adds: tell your executor, or a close friend or relative, where the will is kept. What it takes, in that government's rules: a will made voluntarily, in writing, by someone of sound mind, and signed before witnesses. The guide says you can write it yourself, with advice if it is not straightforward, like owning a business. It also takes reviews: the guide suggests every five years, and after any major change in your life.

Its examples include getting married, having a child, and moving house. Its limit: a signed, witnessed will changes only by an official alteration or a new will. Rules differ from place to place. Quick check for number one: who benefits, who looks after children, who carries it out, and where it is kept.

Subscribe, because next we break down the trust: who puts assets in, who manages them, and who benefits. Number two can look after assets until a young heir is old enough: a trust.

2. A trust that holds family assets

Number two: a trust that holds assets for the family. What it is: a tax authority's guide calls a trust a way of managing assets for people. Those assets can be money, investments, land or buildings. A government health agency describes a living trust: a trustee handles your property when you cannot manage it.

How it works: the settlor puts assets in, the trustee manages them, and the beneficiary benefits. Trustees are the legal owners of the assets, and they manage the trust day to day. They decide how to invest or use the assets, following the settlor's wishes. If trustees change, the guide says, the trust can still continue.

And the beneficiaries can be a whole family, receiving income, capital, or both. The guide's own reasons include protecting family assets, and someone being too young to handle their affairs. It also lists passing on assets while you are still alive, or after death through a will. An example from the guide: shares held in trust until a beneficiary reaches a certain age.

Some trusts put assets aside for a future need, like a grandchild who may need more financial help. The first step, from that guide: the settlor decides how the assets are used, usually in a trust deed. Then the health agency's checklist: talk with a lawyer about setting one up, and ask about fees first. What it takes: trustees ready to manage it day to day, and the guide points to legal or tax advisers.

Its limit: each type of trust is taxed differently, and trust rules differ from place to place. Quick check for number two: wishes written in a deed, trustees ready to serve, and advice before signing. Number three can be as simple as a name on an account, passing it on directly.

3. A named beneficiary on each account

Number three: a named beneficiary on each account and policy that allows one. What it is: the person named to receive an account or a policy when its owner passes away. A markets regulator's investor page describes one version, called transfer on death registration. It lets you pass the investments you own directly to another person or entity upon your death.

How it works: the page says this happens without having to go through probate. Probate, in one government's words, is the legal right to deal with someone's property, money and possessions when they die. With the registration in place, the estate's executor does not have to take any action for that transfer. The person named then re-registers the investments, usually by sending a death certificate and an application.

For life insurance, an insurance regulator says the beneficiary receives a lump sum if death comes while covered. The first step, from the health agency's checklist: list every account and policy in one place, with their numbers. Its list includes retirement accounts, bank accounts, investments, and insurance policies. Then, it says, tell someone you trust where to find those papers.

What it takes: regular reviews of those papers, which the checklist puts at least once each year. It adds a review after any major life event, like a move or a major change in health. Its limit: the markets regulator's page notes that firms decide whether to offer that registration. It adds that the law of each region governs how investments are registered, so rules differ from place to place.

Quick check for number three: a list of every account and policy, a name on each, and a yearly review. Number four is the policy itself, and how much protection a family would need.

4. Life insurance sized to the family's needs

Number four: life insurance, sized to what the family would need. What it is: an insurance regulator says life insurance transfers the financial risk of a death. It pays a death benefit to dependents, to cover their financial needs. The regulator adds that these products have grown to include savings, investment, and wealth inheritance options.

The handbook also lists insurance coverage among the topics a family office advises on. How it works: with term insurance, the beneficiary receives a lump sum if death comes within the coverage period. Term cover has no savings part, so it builds no cash value. In general, the regulator says, the same premium buys a higher payout with term than with other types.

Whole life insurance covers the whole lifetime, and it has a savings part with a cash value. The first step, from the regulator's own calculator: estimate the family's protection gap. It defines the gap as what the family would need to keep its living standard, minus the resources available. The regulator's guide adds a time frame: how long a home loan takes to pay off, and when children start working.

What it takes: premiums, and the regulator notes the younger you are when you start, the lower they generally are. Whole life, it adds, needs a long-term commitment, because cash value takes a long time to build. Its limit: the regulator notes that ending a savings policy early returns far less than was paid in. Insurance rules and products differ from place to place, so check the official pages where you live.

Quick check for number four: the protection gap, the period it covers, and the resources to pay premiums. Number five moves from documents to people: what the next generation learns about money.

5. Money lessons for the next generation

Number five: money lessons for the next generation, step by step. What it is: lessons that match a child's age, from counting coins to long-term planning. The handbook says family businesses can improve their odds of survival by teaching each new generation governance early. It explains why: each new generation meets a growing business and a much larger family.

A bank regulator offers free lessons in separate stages, from preschool to the last years of school. How it works: those lessons start young children on counting coins and telling needs from wants. The next stage adds budgets, saving goals, and the basic ideas of investing, including risk and return. Lessons for teenagers cover financing college, owning a home, and how homeownership can create wealth.

They also explain how to manage a credit card and evaluate card offers. Inside family businesses, the handbook describes an education committee that organizes learning for family members. Its role: nurturing the family's skills and its capacity to work together on governance. Its example: an accounting seminar, so family members can read their company's financial statements.

The first step, from the regulator's guides for parents: practical activities and conversation starters about money. The topics include saving, setting financial goals, choosing what to spend on first, and staying safe online. Those guides also summarize the key ideas of each lesson. What it takes: the regulator's lessons are free, and they can be taught alone or in combination.

Its limit: those lessons follow one school system's grades, so materials and programs differ from place to place. Quick check for number five: lessons matched to age, the guides' conversation starters, and a saving goal. Number six puts those lessons to work: owning a business together, with written family rules.

6. A family business with written rules

Number six: a family business, run with written family rules. What it is: the handbook calls family businesses the world's oldest and most dominant form of business organization. In many countries, it says, family businesses are more than 70% of all businesses. How it works: as new generations join, the handbook says a clear family governance structure becomes mandatory.

Its purpose, in the handbook's words, is to prevent potential conflicts and ensure the continuity of the business. At its center is a family constitution: the family's vision, mission, values, and its rules for the business. It covers policies such as family employment, transfer of shares, and who leads the company next. Employment rules can set the conditions to enter, stay in, and leave the family business.

A family assembly is a formal forum where all family members discuss business and family issues. The first step, from the handbook: put the informal rules in writing, in a constitution shared with all family members. It calls the constitution a living document, updated as the family and the business change. Then a succession plan: many advisors, it notes, recommend starting the search for a successor as early as the current leader's appointment.

What it takes: the handbook says the plan should select the most competent person, family member or not. It also takes agreement: the board, senior managers, and family members all take part in the choice. Its limit: the handbook says its structures must be adapted to local requirements and regulations before use. And business rules, registration, and tax differ from place to place, so check where you live.

Quick check for number six: a written constitution, a family assembly, and a succession plan started early. Number seven starts long before any inheritance: gifts that pass wealth on during life.

7. Gifts during life, not only at death

Number seven: gifts during life, not only an inheritance after death. What it is: the international organization's report defines wealth transfers as gifts and inheritances. A gift moves assets during the giver's lifetime; an inheritance moves them after the giver's death. Across its member countries, one quarter to one half of households report receiving an inheritance or a substantial gift.

Among the wealthiest fifth, the share runs from thirty-nine to 66%, depending on the country. Wealthy households, it notes, also report receiving larger inheritances and gifts. It adds that if recent asset price trends continue, transfers may grow in value and in number. How it works: a tax authority's guide to gifts lists money, personal goods, a house or land, and shares.

In large, wealthy business families, the handbook says family offices monitor gifts of stocks and estate plans. And recall number two: a trust can also pass on assets while the giver is still alive. That guide also describes regular gifts paid from regular income, after usual living costs. An example from that guide: paying into a savings account for a child.

It also notes that anything left in a will is not a gift, but part of the estate. The first step, from that guide: keep a record of what you gave, who received it, its value, and when. It explains why: the person who deals with the estate will need to work out what gifts were given. What it takes: a full handover.

The guide says a gift the giver still benefits from counts toward the estate. Its limit: gift rules and taxes differ from place to place, and some gifts may be taxed. Quick check for number seven: a record of each gift, regular gifts paid from income, and a full handover.

Recap

Number one, a will: write down who benefits and who carries it out. Number two, a trust: the settlor's wishes, written in a trust deed. Number three, named beneficiaries: list every account and policy in one place. Number four, life insurance: estimate the family's protection gap first.

Number five, money lessons: conversation starters that match a child's age. Number six, a family business: the family's rules in a written constitution. Number seven, gifts during life: keep a record of every gift. Which one would your family start with?

Tell us in the comments. Results vary, rules differ where you live, and this is information only, not financial advice. Next on Wealth Filings, watch four money skills that build wealth, linked on screen. Subscribe so you see the next list first.