Wealth, when accumulated through years of hard work, sacrifice, and wise decision-making, carries with it more than just financial value. It represents a legacy of perseverance, entrepreneurial risk-taking, and disciplined financial stewardship. Yet, history and experience tell us that family wealth is seldom guaranteed to last beyond the second or third generation. It is often said that “shirtsleeves to shirtsleeves in three generations” is not merely a cautionary proverb, but a reality borne out in many family legacies. As independent financial planners, we’ve witnessed both successful wealth transfers that empower families for generations and failed transfers that unravel fortunes within a single decade. The difference lies not only in the structures established but in the mindset of each generation.
The first generation: Builders of wealth
For those who created wealth—whether through business, property, professional careers, or disciplined saving—the challenge often lies in how best to transfer their legacy. In our experience, the focus is too often on the mechanics of estate planning – which is important – rather than the values that underpin the wealth. Imparting values requires intentional conversations with children and grandchildren about the journey of wealth creation, the sacrifices made, the mistakes made and avoided, and the principles that they upheld throughout the journey. We often find that where families shy away from talking about money, secrecy breeds entitlement and/or resentment. On the other hand, it is often the case that transparency fosters stewardship and financial responsibility. We have also found that it is important to ensure that estate structures are aligned with the family’s goals. A well-drafted Will, appropriate use of trusts, adequate life insurance, and liquidity planning are essential tools, but they must serve a bigger purpose—preserving not only assets but also harmony among heirs.
Advice for the first generation: Our advice is to begin early, document your wishes clearly, and involve professionals in structuring your estate from the get-go. Importantly, keep the channels of communication with your heirs open at all times – and be sure to frame wealth as an opportunity and a responsibility, not a windfall.
The second generation: Custodians, not consumers
The second generation often finds itself in a precarious position in that it did not create the wealth, yet they are tasked with stewarding it. Without guidance, this generation runs the risk of falling into two traps: reckless consumption or paralysing inaction – both of which can erode wealth.
For the second generation, the responsibility is less about ownership and more about stewardship. Their role is to safeguard the family’s wealth, preserving capital while putting it to productive use. This means striking the right balance between growing investments and making sensible withdrawals, all while continuing the discipline and honouring the values instilled by the first generation. A key part of this responsibility is to avoid diluting the family’s assets through fragmentation. While dividing an estate equally among siblings may feel fair, keep in mind that it can erode collective strength when wealth is split into small, uncoordinated holdings.
Families that succeed in preserving wealth across generations often formalise their approach through governance structures such as family councils or trusteeships. These mechanisms can help the second generation to manage wealth as a united front rather than individual preference.
Advice for the second generation: View your role as custodianship, not consumption. Engage independent professional advisors to ensure sound investment and estate management, and embrace governance structures to keep the family united and aligned.
The third generation: Inheritors and innovators
By the time wealth reaches the third generation, the story of how it was created has often been forgotten or at least dulled. With that distance comes the danger of seeing the family fortune as an entitlement rather than a hard-won legacy. However, it’s important not to overlook that this generation also embodies the future, bringing fresh skills, broader education, and new opportunities to grow the family estate in ways that previous generations could not have imagined.
For this generation, financial literacy and strong mentorship are vital. While knowing how to budget, invest, and create tax efficiency is important, it is only part of the picture. They need to be anchored in the family’s values and vision, and to understand the principles upon which the wealth was built. And while the entrepreneurial spirit should be encouraged, it needs to be balanced with accountability and discipline. Rather than being perceived as passive heirs, this generation should consider themselves active custodians with a responsibility to grow, adapt, and steward the family wealth for a world that looks very different from the one in which it was created.
Advice for the third generation: Respect the sacrifices of those before you, but recognise that stewardship does not mean stagnation. Be sure to use your inheritance wisely, invest in your skills, and innovate responsibly to extend the family legacy.
The importance of stewardship
For us, stewardship is the golden thread that ties family wealth to family values. Stewardship is not only about preserving money, but about using resources wisely for the benefit of both present and future generations. At its heart, stewardship calls for discipline, humility, and a deep sense of responsibility to those who came before. Remember, the transfer of wealth is an emotional and relational journey that extends far beyond Wills, trusts, and tax strategies. True intergenerational wealth transfer happens when wisdom, values, and a shared vision of stewardship are passed down alongside the assets.
Have a great day.
Sue
