My Family Drives Me (Financially) Nuts

When it comes to money, families have a lot of issues to work out. And there’s a lot at stake. It all starts with communication.

Family gatherings should be filled with excitement and fun, but have you ever arrived for the celebration only to find yourself feeling annoyed or frustrated, and ready to turn around and go right back home? You are not alone. Most of us have felt this at one time or another.

And then, throw in a little money on top of it all, like an inheritance, and the potential for hurt feelings and misunderstandings can skyrocket!

We all have the best intentions when it comes to family. We love each other, we want the best for one another, but we often don’t know how to interact. We need to work on our family dynamics, defined as “the patterns and processes by which a family navigates change, growth, expectations and decisions surrounding their wealth, values and goals.”

An example of good intentions gone awry

I had a client who set up a very small trust for her son when he was very young to vest when he turned 18. Her decision was one based on tax efficiency, and aimed at providing the son with some small funds during his college years. But, lo and behold, the trust grew exponentially! Suddenly her 18-year-old was about to become a millionaire!

I asked her, “What have you told him? How have you prepared him?” She had no idea nor thought of the potential impact her decision might have. She did not think that her well-intended, tax-savvy move could turn into something with the potential ramifications of a teenager coming into a massive sum of money.

This windfall reminds us that real people will be affected with every financial and non-financial decision we make. In this example, my client still had options – the option to talk, to share her hopes and dreams for her son, and to work with him to transparently and openly bring him into the fold while helping to prepare him for a bright future.

Where families go wrong: It’s a people problem

Have you heard of the saying “shirtsleeves to shirtsleeves in three generations”? Unfortunately, there’s a lot of truth in it. According to leading research, 70% of wealth dissipates by the third generation due to these three main issues

  • A lack of family communication and trust.
  • A lack of preparation of heirs.
  • Not having a family mission statement in place.

All of these variables are about people. In fact, the vast majority of the reasons for the failure of generational wealth transfer are non-financial.

In reality, most of us tend to spend a lot of time making financial decisions pertaining to how to minimize taxes or transfer our assets effectively through a well-thought-out estate plan. These are all really important decisions to make. But they have very little, if anything, to do with people and the impact our decisions may have on those we love the most.

What families worry about

I spend a lot of time talking to families. Do you know what I hear the most? Here are some examples:

  • “I don’t want to mess up my kids!”
  • “I have questions, but I don’t feel comfortable asking my parents as they might see it as me just looking for a handout.”
  • “I want to join the family business, but I’m not sure how to get my parents to take me seriously.”
  • “I’m not sure what to tell my kids or when to tell them.”

Do you get the picture? Families are worried about how to work together, and they are stuck in figuring out how to move forward.

How families can get on the right track

Fear not! Help is just ahead, and it starts with families taking some time to do some thinking, not about finances, but about values and each other.

Considering the research on how families tend to squander their wealth over the course of three generations, I’d ask you to reflect on the impact you could have on your own family. What would happen if you were more deliberate in designing your family’s future by focusing on these non-financial, qualitative elements? After all, possibilities become realities by design, not by default.

What possibilities could you transform into realities if each family member clearly articulated his or her values and defined a vision and mission for themselves, and then you worked together to identify a set of shared family values, and vision and mission for your family?

What possibilities could you transform into realities if you then used your shared purpose to strengthen family communication and cohesion, and to develop the personal and leadership capabilities of individual family members?

The possibilities are yours to decide.

What comes next

Want to learn more? Join me! Over my next four columns, I will lay out key concepts designed to help your family create a framework in approaching Family Dynamics.

During our journey together, we will explore:

1. What is an Enterprising Family, and how do we work toward becoming one?

2. How can we transform into a cohesive family? Understanding families as complex emotional systems.

3. Naming the unique complexities of families of financial wealth and learning how to navigate them.

4. Embracing the multiple dimensions of wealth, or “family capital,” rather than seeing wealth as financially oriented only.

About the Author

Katherine W. Dean, CFP, CIMA

Head of Family Dynamics, Wells Fargo Private Bank

Katherine Dean is the Head of Family Dynamics for Wells Fargo Private Bank. Dean leads the ongoing evolution of the Family Dynamics program curriculum as well as the management of the Family Dynamics team that is distributed across the country. The Family Dynamics team helps families sustain their wealth across generations, by facilitating decision-making about the complex issues that arise as a result of substantial wealth.

Most Popular

13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
October 21, 2020
How to Be Happy (Not Bored!) in Retirement – Starting Today
happy retirement

How to Be Happy (Not Bored!) in Retirement – Starting Today

Here are 12 ways to prepare now for retirement so that you’ll be happy, active, fulfilled and never, ever bored.
October 21, 2020
Election 2020: Joe Biden's Tax Plans

Election 2020: Joe Biden's Tax Plans

With the economy still in trouble, tax policy takes on added importance in the 2020 election. So, let's take a look at what Joe Biden wants to do abou…
October 22, 2020


States With Scary Death Taxes

States With Scary Death Taxes

Federal estate taxes are no longer a problem for all but the extremely wealthy, but several states have their own estates taxes and inheritances taxes…
October 19, 2020
Considering Early Retirement? 5 Things to Know
Making Your Money Last

Considering Early Retirement? 5 Things to Know

Before you accept a buyout, do the math to see if you really can afford to retire. (We'll show you how.) Then follow up with these tried-and-true stra…
October 15, 2020
9 Tips for Better Time Management in Retirement

9 Tips for Better Time Management in Retirement

These important time management techniques will help destress your life as you get busier -- yes, busier -- in your golden years.
October 14, 2020
10 Worst Things to Keep in Your Wallet

10 Worst Things to Keep in Your Wallet

Storing your passport book or card, a spare key, or any of these other important items in your wallet leaves you open to identity theft -- or worse.
October 9, 2020