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America’s 'Great Wealth Transfer': How to pass on values and purpose
It's estimated that $68 trillion will pass down from Boomers to millennials. Here's how ultra-rich families can do the most amount of good with what they inherit.
- Approximately $68 trillion will pass from boomers to millennials over the next few decades in what's known as the Great Wealth Transfer.
- 90% of family wealth is gone by the time the third generation comes around, primarily due to familial conflict.
- Social capital advisor Richard Tafel suggests 4 steps families should follow so they transfer wealth in a way that does the most amount of social good.
The U.S. is going through the largest transfer of wealth in history. The question for many ultra-high net worth individuals (HNI) is how to make the passing on of wealth purposeful and impactful.
Many of us who weren't raised in wealth believe that if we just had "more," all would be well. But having worked with many wealthy families and foundations in my career, I've discovered that wealth brings its own set of challenges. Knowing how to pass wealth down properly is one of them.
The time to do this right has never been better. America's high net worth individuals are experiencing two dramatic trends. First, they are part of what is often referred to as the "Great Wealth Transfer," with approximately $68 trillion estimated to pass from boomers to millennials over the next few decades.
Second, the generational transfer of wealth often doesn't go well. In fact, one recent U.S. Trust survey showed that 90% of family wealth is gone by the time the third generation comes around. The primary reason is familial conflict.
Added to the stress of getting this right, as most wealthy parents are well aware, is the damage large sums of money can have on their children's ability to craft their own lives and break out of their parents' shadow. U.S. Trust Company, Insights on Wealth and Worth, reported that more than 50% of all wealthy parents are not confident their children will be prepared to handle a financial inheritance.
To further complicate this transfer moment, the generations have differing views on "doing good." Many in the older generation feel a responsibility to give back to society through philanthropy, often a family foundation, while most young inheritors I've worked with are much more interested in for-profit social ventures or a hybrid for-profit/non-profit model.
Passing on wealth appears simple, but doing it correctly requires quite a bit of work.
Common questions raised by HNIs about passing on their inheritance include:
- How do I preserve the family legacy for multiple generations?
- How do I accomplish this without damaging the next generation?
- How do I accomplish while providing the greatest social impact for good?
Based on my experience as an advisor to high net worth families, I suggest four steps toward accomplishing these goals.
1. Remove the secrecy, establish transparency
Addressing the secrecy around money in families is an important first step.
In my first job after graduating from divinity school, I served on the staff of Memorial Church at Harvard. Part of my job required me to meet some of the best-known wealthy families in America and ask their support for our annual appeal. What struck me the most at these meetings was the families' trepidation about giving money away because they were not sure how long their funds would last. They explained that there was secrecy within the family around their inherited money, which left them with a lack of clarity about their own philanthropy.
Secrecy breeds fear in these situations. HNIs often underestimate the effects of secrecy and the ability of their inheritors to see the big picture. One solution is to begin an open dialog facilitated by a dispassionate professional coach. As an outsider, a coach is in an ideal position to interview all of the stakeholders about their values, hopes, and fears, and to bring everyone together, in person, if possible.
The meeting should include a candid conversation about the extent and current status of the family's assets, as well as an honest discussion around the family's values. A trusted advisor such as a CPA, attorney or wealth manager can be helpful in providing factual information and historical background, if appropriate.
Having worked with hundreds of clients in these situations, I've discovered a pattern; we all share some pretty common values, including variations on family, love, creativity, honesty, faith, health, truth, knowledge, and economic security. Finding out individual values ahead of the family meeting can help move everyone toward an articulation of the family's values together. A question can set the stage for a productive outcome: What legacy do we as a family want to pass on? What are our family values that will guide those decisions? What tangible steps can we take to make sure our decisions reflect our values?
This is also a great time for a good facilitator to help uncover fears. Underlying wealth transfer are deep emotions. For example, the younger generation that inherits the wealth often experiences shame at not having created it. This can lead to impostor syndrome: Parents imposing their values on their children without necessarily listening to their children's thoughts and values. That, coupled with subtle threats of disinheritance, can lead to harmful results. Many inheritors fear that they'll be cut out of the family legacy if they don't go along. Inheritors sometimes share fears that they won't know how to manage the inheritance. Using an unbiased facilitator or coach can be helpful here.
2. Making the legacy real
Using the facilitated time to discuss the family's legacy goals can have a profound social impact. Considerations include understanding the difference between charitable giving and social-impact investing; tax consequences of giving; and the pluses and minuses of various charitable vehicles.
Discuss the structures you will put in place to achieve your goal. For example: How will you identify worthwhile social ventures to donate to or invest in? Do you want to be solicited directly by prospective non-profit beneficiaries? Do you have a family foundation, or will social-impact investing be accomplished in another way? In my experience, more inheritors want to roll up their sleeves and have more of a personal impact in ways their parents did not. Writing out a well-conceived plan helps bring clarity to the family's goals and objectives. That includes deciding how much of your investment will be used to build the infrastructure needed to help the organizations that you support succeed. What budget is necessary to make the legacy dream a reality?
Having an impact means more than giving away money. It means being very strategic about how, what, and where you give.
3. Selecting the Right Vehicle
With transparency achieved, values agreed upon, and strategy for the legacy impact determined, it is time to decide on the appropriate vehicle. It is important to consult with experienced advisors who are well-versed in philanthropy at this stage. Relying on poorly informed or strategically unprepared counsel can and most likely will cause more harm than good and can be very costly to the family legacy.
Your advisors should have deep expertise in the philanthropic arena, including social-impact investing, from both the wealth transfer and non-profit beneficiary perspectives. Far too often, well-intentioned plans are not properly executed. Errors can result in misdirected and/or depleted philanthropic resources, leaving the family legacy in disarray.
An experienced consultant should be able to quickly explain the difference between a private and a public foundation. They can help you develop and articulate your mission and align that mission with your strategy. They can assist with identifying organizations to get involved with and help determine the right ones where you should become part of the board and which ones you should volunteer at, as well as help you determine how much should be given to any one organization.
Hybrid organizations that combine charitable giving with social-impact investing often bridge the generational divide. This requires getting the proper structures built early. Families that seek to cut corners in the beginning stages are often frustrated by failed structures later. As someone who has done this work for many years, I'm often humbled working with accountants and lawyers in the field who continue to educate me on the possibilities and the power of getting it right in the beginning.
4. Join or create a network of peers
In addition to accountants, wealth advisors and attorneys, it is well worth the family's time and money to join networks of other high net worth individuals, where they can meet their peers and learn from them. Organizations such as Nexus (next-generation philanthropy) and the Family Office Association of America (which offers specific workshops in intergenerational wealth transfer) are two good examples, but there are many more, and some might be local to you.
I have found that dealing with families in helping shape their philanthropic and social-impact investing goals is greatly rewarding work. It allows me to get beyond the transactional relationships and build trust with my clients and their other advisors.
The most critical message for those passing down wealth is to remember that you are passing down more than just wealth. You are passing down your values.
The great wealth transfer taking place is a tremendous opportunity to make significant changes for good in our world. Following these guidelines can help move you and your family toward a true legacy with a real impact for good.
Richard Tafel is director of Marcum Social Capital Advisors, a division of Raffa-Marcum's Nonprofit & Social Impact Group. He can be reached at firstname.lastname@example.org.Marcum LLP is one of the largest independent accounting and advisory firms in the U.S., with offices in major business markets across the country and select international locations. For more information, visit marcumllp.com.
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Andy Samberg and Cristin Milioti get stuck in an infinite wedding time loop.
- Two wedding guests discover they're trapped in an infinite time loop, waking up in Palm Springs over and over and over.
- As the reality of their situation sets in, Nyles and Sarah decide to enjoy the repetitive awakenings.
- The film is perfectly timed for a world sheltering at home during a pandemic.
Richard Feynman once asked a silly question. Two MIT students just answered it.
Here's a fun experiment to try. Go to your pantry and see if you have a box of spaghetti. If you do, take out a noodle. Grab both ends of it and bend it until it breaks in half. How many pieces did it break into? If you got two large pieces and at least one small piece you're not alone.
But science loves a good challenge<p>The mystery remained unsolved until 2005, when French scientists <a href="http://www.lmm.jussieu.fr/~audoly/" target="_blank">Basile Audoly</a> and <a href="http://www.lmm.jussieu.fr/~neukirch/" target="_blank">Sebastien Neukirch </a>won an <a href="https://www.improbable.com/ig/" target="_blank">Ig Nobel Prize</a>, an award given to scientists for real work which is of a less serious nature than the discoveries that win Nobel prizes, for finally determining why this happens. <a href="http://www.lmm.jussieu.fr/spaghetti/audoly_neukirch_fragmentation.pdf" target="_blank">Their paper describing the effect is wonderfully funny to read</a>, as it takes such a banal issue so seriously. </p><p>They demonstrated that when a rod is bent past a certain point, such as when spaghetti is snapped in half by bending it at the ends, a "snapback effect" is created. This causes energy to reverberate from the initial break to other parts of the rod, often leading to a second break elsewhere.</p><p>While this settled the issue of <em>why </em>spaghetti noodles break into three or more pieces, it didn't establish if they always had to break this way. The question of if the snapback could be regulated remained unsettled.</p>
Physicists, being themselves, immediately wanted to try and break pasta into two pieces using this info<p><a href="https://roheiss.wordpress.com/fun/" target="_blank">Ronald Heisser</a> and <a href="https://math.mit.edu/directory/profile.php?pid=1787" target="_blank">Vishal Patil</a>, two graduate students currently at Cornell and MIT respectively, read about Feynman's night of noodle snapping in class and were inspired to try and find what could be done to make sure the pasta always broke in two.</p><p><a href="http://news.mit.edu/2018/mit-mathematicians-solve-age-old-spaghetti-mystery-0813" target="_blank">By placing the noodles in a special machine</a> built for the task and recording the bending with a high-powered camera, the young scientists were able to observe in extreme detail exactly what each change in their snapping method did to the pasta. After breaking more than 500 noodles, they found the solution.</p>
The apparatus the MIT researchers built specifically for the task of snapping hundreds of spaghetti sticks.
(Courtesy of the researchers)
What possible application could this have?<p>The snapback effect is not limited to uncooked pasta noodles and can be applied to rods of all sorts. The discovery of how to cleanly break them in two could be applied to future engineering projects.</p><p>Likewise, knowing how things fragment and fail is always handy to know when you're trying to build things. Carbon Nanotubes, <a href="https://bigthink.com/ideafeed/carbon-nanotube-space-elevator" target="_self">super strong cylinders often hailed as the building material of the future</a>, are also rods which can be better understood thanks to this odd experiment.</p><p>Sometimes big discoveries can be inspired by silly questions. If it hadn't been for Richard Feynman bending noodles seventy years ago, we wouldn't know what we know now about how energy is dispersed through rods and how to control their fracturing. While not all silly questions will lead to such a significant discovery, they can all help us learn.</p>
The multifaceted cerebellum is large — it's just tightly folded.
- A powerful MRI combined with modeling software results in a totally new view of the human cerebellum.
- The so-called 'little brain' is nearly 80% the size of the cerebral cortex when it's unfolded.
- This part of the brain is associated with a lot of things, and a new virtual map is suitably chaotic and complex.
Just under our brain's cortex and close to our brain stem sits the cerebellum, also known as the "little brain." It's an organ many animals have, and we're still learning what it does in humans. It's long been thought to be involved in sensory input and motor control, but recent studies suggests it also plays a role in a lot of other things, including emotion, thought, and pain. After all, about half of the brain's neurons reside there. But it's so small. Except it's not, according to a new study from San Diego State University (SDSU) published in PNAS (Proceedings of the National Academy of Sciences).
A neural crêpe
A new imaging study led by psychology professor and cognitive neuroscientist Martin Sereno of the SDSU MRI Imaging Center reveals that the cerebellum is actually an intricately folded organ that has a surface area equal in size to 78 percent of the cerebral cortex. Sereno, a pioneer in MRI brain imaging, collaborated with other experts from the U.K., Canada, and the Netherlands.
So what does it look like? Unfolded, the cerebellum is reminiscent of a crêpe, according to Sereno, about four inches wide and three feet long.
The team didn't physically unfold a cerebellum in their research. Instead, they worked with brain scans from a 9.4 Tesla MRI machine, and virtually unfolded and mapped the organ. Custom software was developed for the project, based on the open-source FreeSurfer app developed by Sereno and others. Their model allowed the scientists to unpack the virtual cerebellum down to each individual fold, or "folia."
Study's cross-sections of a folded cerebellum
Image source: Sereno, et al.
A complicated map
Sereno tells SDSU NewsCenter that "Until now we only had crude models of what it looked like. We now have a complete map or surface representation of the cerebellum, much like cities, counties, and states."
That map is a bit surprising, too, in that regions associated with different functions are scattered across the organ in peculiar ways, unlike the cortex where it's all pretty orderly. "You get a little chunk of the lip, next to a chunk of the shoulder or face, like jumbled puzzle pieces," says Sereno. This may have to do with the fact that when the cerebellum is folded, its elements line up differently than they do when the organ is unfolded.
It seems the folded structure of the cerebellum is a configuration that facilitates access to information coming from places all over the body. Sereno says, "Now that we have the first high resolution base map of the human cerebellum, there are many possibilities for researchers to start filling in what is certain to be a complex quilt of inputs, from many different parts of the cerebral cortex in more detail than ever before."
This makes sense if the cerebellum is involved in highly complex, advanced cognitive functions, such as handling language or performing abstract reasoning as scientists suspect. "When you think of the cognition required to write a scientific paper or explain a concept," says Sereno, "you have to pull in information from many different sources. And that's just how the cerebellum is set up."
Bigger and bigger
The study also suggests that the large size of their virtual human cerebellum is likely to be related to the sheer number of tasks with which the organ is involved in the complex human brain. The macaque cerebellum that the team analyzed, for example, amounts to just 30 percent the size of the animal's cortex.
"The fact that [the cerebellum] has such a large surface area speaks to the evolution of distinctively human behaviors and cognition," says Sereno. "It has expanded so much that the folding patterns are very complex."
As the study says, "Rather than coordinating sensory signals to execute expert physical movements, parts of the cerebellum may have been extended in humans to help coordinate fictive 'conceptual movements,' such as rapidly mentally rearranging a movement plan — or, in the fullness of time, perhaps even a mathematical equation."
Sereno concludes, "The 'little brain' is quite the jack of all trades. Mapping the cerebellum will be an interesting new frontier for the next decade."
What happens if we consider welfare programs as investments?
- A recently published study suggests that some welfare programs more than pay for themselves.
- It is one of the first major reviews of welfare programs to measure so many by a single metric.
- The findings will likely inform future welfare reform and encourage debate on how to grade success.
Welfare as an investment<p>The <a href="https://scholar.harvard.edu/files/hendren/files/welfare_vnber.pdf" target="_blank">study</a>, carried out by Nathaniel Hendren and Ben Sprung-Keyser of Harvard University, reviews 133 welfare programs through a single lens. The authors measured these programs' "Marginal Value of Public Funds" (MVPF), which is defined as the ratio of the recipients' willingness to pay for a program over its cost.</p><p>A program with an MVPF of one provides precisely as much in net benefits as it costs to deliver those benefits. For an illustration, imagine a program that hands someone a dollar. If getting that dollar doesn't alter their behavior, then the MVPF of that program is one. If it discourages them from working, then the program's cost goes up, as the program causes government tax revenues to fall in addition to costing money upfront. The MVPF goes below one in this case. <br> <br> Lastly, it is possible that getting the dollar causes the recipient to further their education and get a job that pays more taxes in the future, lowering the cost of the program in the long run and raising the MVPF. The value ratio can even hit infinity when a program fully "pays for itself."</p><p> While these are only a few examples, many others exist, and they do work to show you that a high MVPF means that a program "pays for itself," a value of one indicates a program "breaks even," and a value below one shows a program costs more money than the direct cost of the benefits would suggest.</p> After determining the programs' costs using existing literature and the willingness to pay through statistical analysis, 133 programs focusing on social insurance, education and job training, tax and cash transfers, and in-kind transfers were analyzed. The results show that some programs turn a "profit" for the government, mainly when they are focused on children:
This figure shows the MVPF for a variety of polices alongside the typical age of the beneficiaries. Clearly, programs targeted at children have a higher payoff.
Nathaniel Hendren and Ben Sprung-Keyser<p>Programs like child health services and K-12 education spending have infinite MVPF values. The authors argue this is because the programs allow children to live healthier, more productive lives and earn more money, which enables them to pay more taxes later. Programs like the preschool initiatives examined don't manage to do this as well and have a lower "profit" rate despite having decent MVPF ratios.</p><p>On the other hand, things like tuition deductions for older adults don't make back the money they cost. This is likely for several reasons, not the least of which is that there is less time for the benefactor to pay the government back in taxes. Disability insurance was likewise "unprofitable," as those collecting it have a reduced need to work and pay less back in taxes. </p>