The Hard Research on the Softer Side of Family Dynamics.

Isn’t legacy planning soft stuff without research or hard numbers? Legacy work leans into the softer side of culture and family dynamics, but it is not soft. Arguably this work is harder than that of the technical planning. Why? Because family and people are messy, especially when money is involved.

Research done by Williams Group from 1975-2001 looked at over 3,250 families of wealth. It was an international study and the most comprehensive to date. One of the things they asked wealthy families was to identify why their estates were failing after the second and third generations.

Overwhelmingly, G1s speculated that the number one reason for failure was professional errors in accounting, legal or financial areas. However, when Williams Group crunched the numbers, less than 3% – around 95 families out of 3,250 – failed due to technical mistakes. So what was causing families to fail?  

The first thing that the numbers confirmed is the idea that wealth does not survive being passed down. Famously, they found that 70% of estate plans failed with each successive generation (failure is defined by an involuntary loss of assets). That means the failure rate by the third generation is an astounding 90%. 

Within this failure rate, Williams Group broke down the reasons into three categories: Lack of trust and communication, Failure to Prepare Heirs, and Lack of Mission. They found that 60% of all estate failures was due to a breakdown of trust and communication within the family, 25% was due to failure to prepare heirs, and a lack of mission accounted for 10% (5% accounting for “All Other Causes” including the 3% for technical problems).  

We can look at these findings and, basically, summarize that families are failing from a lack of communication. Essentially, a failure to communicate (60% of the reason for failure) can be translated to mean family fighting with each other and splitting the estate apart. When trust is present you can do so much. But when trust evaporates building back is no simple task. 

Unprepared heirs (25% of the reason) can be translated to parents over focusing on the building of wealth and not the building of or investing in their heirs.  Building up and investing in their heirs for the responsibilities coming their way is demands creativity and energy. 

And Mission (10%) is a straight forward process to discover and write down the values and uniqueness of the family. Family mission is quantifying the full inheritance of the five capitals beyond the financial, namely intellectual, relational, character and spiritual

All of these can be boiled down to a lack of communication but through three different avenues: 95% of the reasons why families are failing is due to a lack of soft-skill relational issues.  

Where are we today? Are we like those who have gone before, pouring all our time into our projects, kingdoms, and professionals, that we unintentionally and without a word communicate to our heirs how little they mean to us? Instead, we want to lean into our family’s operating system with all the skills and intentionality that brought us to having these problems.  

So how do we solve it? 

Intentionally decide to leave a full heritage, and legacy beyond the financial. 

Lean into the family dynamics. Put resources behind the work. Consider hiring someone to help with the family dynamics. 

There is hope. Tomorrow can be better. But you need change. Why not start today?