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When we think about handling wealth across generations, things like taxes and estate planning usually come to mind first. But there are other challenges that are just as important, even though they might not be as obvious. These challenges have more to do with feelings, relationships, and making decisions together as a family. And they can have a big impact on how well the family's wealth is kept safe and passed down.
Let's take a closer look at three of these hidden challenges and some ideas for how to deal with them:
1. Wealth Isn't Just About Money: It's Tied to Our Emotions and Values
Wealth is about more than just numbers. It's often connected to how we see ourselves, our family relationships, and how we feel about ourselves. The pressure to keep the family fortune going or even make it bigger can cause a lot of stress and worry. And different generations might have different ideas about wealth, which can make it hard to agree on how to handle it.
It's not uncommon for a family where, for example, the grandfather is a self-made millionaire, values hard work and frugality. His children, however, see wealth as a means to provide opportunities and experiences. One daughter loves traveling but also her thriving career contributing to the family’s success, while his son believes the family fortune should be used for good over returns. Furthermore, one grandchild is ashamed of the family wealth, while another flaunts it. These difference in perspective leads to disagreements on spending, investments, and creates tension across the family.
Here are some things that can help:
Talking openly and honestly about how wealth affects your family, both emotionally and practically. This can be difficult, but it's important to create a safe space where everyone feels comfortable sharing their thoughts and feelings.
Working with a counselor or therapist who specializes in wealth issues. These professionals can help families manage the emotional and relational challenges that come with wealth.
Creating a family charter that outlines your shared values and goals for the wealth. This can help to ensure that everyone is on the same page and that decisions are made in a way that is consistent with your family's values, or allows each one to be incorporated to at least some extent.
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2. Finding the Right Investments Can Be Tough, Especially When There Are So Many Choices
Families with a lot of wealth have a wide range of investment options to choose from, each with its own risks and rewards. And different generations might have different levels of comfort with risk and different investment preferences. For example, the older generation is very likely more heavily invested and passionate about real estate in private equity, whereas the younger generation is bullish on crypto. This can make it hard to agree on an investment strategy that works for everyone.
Here are some things that can help:
Developing a shared investment philosophy that reflects your family's values and goals. This will help you to make investment decisions that are consistent with what is important to your family.
Working with a financial advisor who can help you navigate the investment landscape and find options that align with your family's needs. A good financial advisor can provide you with objective advice and help you to understand the risks and rewards of different investment options.
Holding regular family meetings to discuss investment decisions and make sure everyone is on the same page. This can help to ensure that everyone feels involved in the decision-making process and that there are no surprises down the road.
3. Managing Wealth Is More Than Just Making Investments: It's a Complex Job
Managing wealth involves a lot more than just deciding where to invest money. It also includes things like legal and tax planning, managing property, and working with different advisors and professionals. This can be a complicated and time-consuming task, especially for families with a lot of wealth.
Here are some things that can help:
Setting up a family office to manage your wealth professionally. A family office can handle all of the day-to-day tasks of managing your wealth, freeing you up to focus on other things. I previously wrote about how to set up a family office, which you can read about here.
Working with a multi-family office that can provide a range of services to multiple families. This can be a good option for smaller families who don't want to set up their own family office.
Hiring experienced professionals to handle specific aspects of wealth management, such as legal, tax, and investment planning. This can help to ensure that your wealth is being managed in a way that is efficient and effective.
In Conclusion
Managing wealth across generations is about more than just money. It's also about understanding the emotional, relational, and decision-making challenges that come with it. By facing these challenges head-on, families can work together to preserve their wealth and create a lasting legacy for future generations.
As always, Be Bold, Be great, and Keep Pushing Forward!
P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to discuss how we can partner together.
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About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.