A Major Financial Error is to Mistake Money for Wealth

In the mid-20th century, the great Vanderbilt houses were torn down, and while their name lives on at Vanderbilt University, the influence and prominence of the family itself has fallen out of sight almost entirely.

Although my only experience with the Vanderbilts was as school mates, I have seen destructive effects of wealth on families. Seeing these outcomes was a primary reason I decided to focus my career on discovering what works in keeping families together when money matters, and helping families find common purpose with sustained meaning when money is a cornerstone to their dynamics.

In my years of observation, study and working with families, I have made two key observations that come to play when those who amass great fortunes determine how to pass their wealth from one generation to the next.

Families that focus on the assets as the key cornerstone to their family, do what they can to protect the assets. They construct brilliant plans to offset estate taxes, to take advantage of tax laws, to distribute assets “at the right time.” The assets will be protected. However, overtime, the soul of the family erodes, and with it, the family fortune because there has been no attention to its purpose. Individuals further their own agendas which may be in conflict with the long term growth of the money. Squabbling, squandering and over spending become the ingredients to financial wealth erosion. The sole or focus was on the fortune rather than on also preparing the heirs to receive and steward the assets.

Successful families understand that merely providing a healthy checking account to next generations is not enough. They realize that there must be a bigger purpose that all family members buy into and champion. They realize that the family structure can continue strong, lasting generations. They change the focus of their perspective on their money from being owners to being stewards. They build a family culture that is passed on from one generation to the next. The family fortune becomes merely one of the tools entrusted to the family to steward.

As you think about which of these two scenarios you advocate, ask yourself this question: “Are you preparing your heirs to become stewards of wealth or merely preparing the assets to be transferred?” Why is this question relevant? It is so, because it can prevent you from mistaking money as the only component to wealth. Do not mistake money as the only component of wealth.

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