Nearly every article on the Great Wealth Transfer discusses how the Silent Generation and Baby Boomers are poised to transfer about $84.4 trillion in assets through 2045, with $72.6 trillion going directly to heirs, according to Cerulli Associates.
But how the ultra-wealthy perceive wealth could have implications for others. Many goods and services, initially exclusive luxuries for the ultra-wealthy — such as electricity, indoor plumbing and refrigeration — are now taken for granted by the broader population. How the ultra-wealthy think about wealth today will shape how the broader world thinks about it tomorrow.
In the book Complete Family Wealth, co-authors James Hughes Jr., Keith Whitaker and Susan Massenzio recount a wise grandmother's words: "Our family has always been rich, and sometimes we've had money." This statement encapsulates a perspective long held in ultra-wealthy circles, now reaching a wider audience. True wealth for an individual, household or family lies in their well-being — a flourishing family unit.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You might wonder how to apply this concept in your own family. Complete Family Wealth provides a framework, The Five Forms of Family Capital, which we'll modify slightly for a more actionable approach to wealth transfer beyond just money. Additional insights can be gleaned from organizations like the UHNW Institute and ideas such as Wealth 3.0.
Here's a brief explanation of each form of capital, along with economical and generous ways to implement them:
1. Cultural capital (spiritual capital): Reflects the family's shared vision (purpose, values and roles).
Economical: Order pizza, grab some scrap paper and dedicate a Friday night to drafting your personal, household or family vision. TFM defines vision as purpose plus values plus roles. Don’t worry about getting it perfect, just get started.
Generous: Arrange a family retreat with an external facilitator, combining vacation elements with sessions to refine individual, household and family visions.
2. Human capital: Promotes the physical and mental health of family members.
Economical: Take a family walk or hike without phones (except one for emergencies). This is a simple way to enjoy one another’s company and the benefits of exercise.
Generous: Enroll in fitness classes together (yoga, spin, boot camps, kickboxing, etc.). If a family elder can sponsor, even better. This is a fun way to emphasize the value of physical health.
3. Social capital: Strengthens a family’s relationships and their ability to make decisions together.
Economical: Start a family book club or movie night, alternating choices among members. It's an opportunity to deepen discussions beyond the usual topics. Books we suggest starting with: Generations by Jean Twenge or The Good Life by Robert Waldinger and Marc Schulz. Movies could be Defending Your Life or Dead Poets Society.
Generous: Virtual family game night with a game-show host. This isn’t as expensive as you’d think, and you can’t beat the convenience of a company like Playful Humans. We’ve found 8 p.m. on a weekday night, planned four to six weeks in advance, as a universally doable time for all life stages.
4. Intellectual capital: Shares the collective knowledge, experiences and wisdom of the family.
Economical: Have someone in your family teach a class about what they know to the rest of the family. This could be Uncle John teaching everyone to hit a golf ball, Aunt Mary teaching about making the world’s best cupcakes or Grandpa Pete teaching everyone to drive a stick shift.
Generous: Create a private family podcast. It has never been easier to record and edit audio and never been cheaper to preserve the audio in a way that it can be used later. All you need is some basic equipment/software, a passionate member of the family to do the interviewing and some willing subjects to be interviewed. Some of the questions we love are around wisdom: What has your life taught you about love, success, happiness, leadership, etc.?
5. Financial capital: Refers to cash, securities, real estate and other traditional assets.
This is a well-trodden path with plenty of complexity. Consult your financial team for tailored advice.
These initiatives all demand time investments. Consider dedicating 30 minutes to an hour a month preparing for your family’s “wealth transfer.” Reflect on the optimal allocation of your time across these capitals.
While most people focus 95% of their effort on financial capital, this alternative framework offers a broader perspective on legacy. What you choose to do with it is entirely in your hands.
Related Content
- Think of Retirement as the Goal, Not the Vision
- The Five Stages of Retirement (and How to Skip Three of Them)
- Five Things I Wish I’d Known Before I Retired
- Retirement Is a Journey: Do You Have the Map?
- To Create a Happy Retirement, Start With the Three Ps
-
Ask the Editor — Tax Questions on Inherited IRAsAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the rules on inheriting IRAs.
-
I Asked Experts When It's Worth Splurging on Beauty and Skincare — and When You Can SaveSmart Shopping Experts agree that while you don't have to spend three figures on your products, some higher-priced items have value.
-
Retiring Early? This Strategy Cuts Your Income Tax to ZeroWhen retiring early, married couples can use this little-known (and legitimate) strategy to take a six-figure income every year — tax-free.
-
Ditch the Golf Shoes: Your Retirement Needs a Side GigA side gig in retirement can help combat boredom, loneliness and the threat of inflation eroding your savings. And the earlier you start planning, the better.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet SpotConverting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on VacationHere are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right NowBig portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This InsteadYes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
