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6 Mistakes That Destroy Generational Wealth (And How to Prevent Them) Thumbnail

6 Mistakes That Destroy Generational Wealth (And How to Prevent Them)

“We spent 40 years building this… and in five years, it was gone.”

That line still hits me.

A parent builds the business, invests wisely, pays off the house, buys the life insurance. The plan was to give their kids a better start. But without structure and communication, all that work can evaporate within a generation.

Let me walk you through six common mistakes I’ve seen families make when transferring wealth. And more importantly, how to avoid them.

1. Not Talking About the Money

For a lot of families, money is a private subject. But when we avoid the conversation, it creates confusion and conflict. The next generation is left guessing what exists, where it is, and what it’s meant for.

What works instead:

  • Hold a family financial meeting once a year
  • Bring your heirs into conversations with your advisor or CPA
  • Share not just the numbers, but your values behind them

I always say this: wealth is a tool. If your family doesn’t know how to use it, it’s like handing them a car without teaching them how to drive.

2. No Estate Plan

I’ve met clients with $10 million portfolios and no will. It happens more than you’d think. Without a plan in place, the state decides how your assets get divided.

That can mean:

  • Probate court
  • Legal fees
  • Delays and disputes
  • Outcomes that don’t reflect your wishes

Your move: Work with an estate attorney. Build a plan that reflects your goals. Set up a trust if you want to avoid probate or give your heirs controlled access to funds. Update your plan after major life events. And always review your beneficiary designations,  especially on retirement accounts and insurance policies.

3. Not Teaching Financial Literacy

This one is personal. You can’t expect someone to manage wealth if they’ve never learned how. It’s not fair to them, and it puts your legacy at risk.

Here’s what I recommend:

  • Teach the basics early: budgeting, saving, investing
  • Involve your kids in your planning conversations
  • Encourage (or require) them to work with a professional advisor
  • Some families even write financial education into their trusts

Passing down wealth without passing down the skill to manage it is a recipe for failure.

4. Ignoring Tax Implications

Taxes can be one of the biggest threats to inherited wealth. Without a plan, heirs might find themselves stuck with a large tax bill — or worse, forced to sell assets to cover it.

How to stay ahead:

  • Gift assets gradually while you’re alive (the IRS allows up to $18,000 per year per person as of 2024)
  • Use trusts and other vehicles that protect and minimize tax exposure
  • Coordinate estate planning with your CPA and financial advisor

The laws change. Make sure your plan keeps up.

5. Putting All Your Eggs in One Basket

Whether it’s a single property, a family business, or a large stock holding, concentration is a risk. If the value drops or the next generation doesn’t want to run it, everything could unravel.

Your plan should include:

  • Diversified investments
  • A succession plan if you own a business
  • Clear instructions on who manages what

If your family doesn’t have interest or experience in managing real estate or a business, forcing it on them creates more stress than legacy.

6. Letting Life Events Outpace the Plan

Divorce. Remarriage. Blended families. New grandchildren. All of these change the dynamic — and your plan should reflect that.

Things to review regularly:

  • Is everyone still fairly represented?
  • Are there protections in place in case of divorce or lawsuits?
  • Do your documents align with your current wishes?
  • Have you clearly communicated those wishes to your family?

Estate planning is not a one-and-done deal. It should grow as your family grows.

Final Thought

Passing down wealth is about more than handing over assets. It’s about preparing your family to manage, protect, and grow what you’ve built.

I’ve helped families navigate these conversations for over 30 years. I’ve seen what works. I’ve also seen what happens when no plan is in place.

If you’ve built something worth protecting, take the time to make sure your family knows how to carry it forward.

And if you're not sure where to start — just reach out. We’ll figure it out together.