In previous editions, we presented Residence and Citizenship planning as a wealth preservation and estate planning tool. You can READ IT HERE for quick reference.

Today, we consider a critical fundamental issue that underscores the ability of wealthy individuals and families to preserve, sustain and institute intergenerational wealth, that is the “WHY” or “PURPOSE” of Wealth.

Based on research, we know that first-generation (Gen 1) Founders (Patriarchs & Matriarchs) through hard work and astute entrepreneurship build up their wealth and asset base for themselves and their families. The second-generation (Gen 2) generally seeks to expand on that wealth and assets, however by the third generation (Gen 3), it’s largely about expanding the wealth. While there are no issues with heirs and heiress of wealth spending the wealth, the reality of the fortunes of the family or individuals could easily become that of shirtsleeves to shirtsleeves in three generations, where there remains only folklore and stories that speak to the earlier wealth and assets that once was. However, we know that where there is a Why or Purpose for the wealth and assets, it is much likely that successful and successive intergenerational wealth could be attained.

As an individual’s wealth and that of his/her family grows, it is easy to get consumed by the numbers viz return on investments, taxes, balance sheets, interest income amongst others. It is however expedient to take a step back from chasing all the numerical values and reflect on the why—the purpose of your wealth and the collective purpose of the wealth for your family, beneficiaries and dependents—to assess whether the wealth and hard work are helping you and your family to achieve fulfilling lives and to explore patent or latent potentials.

We define the WHY of individual and family wealth as the set of goals, objectives, vision, mission, or use that is sought to be achieved with the wealth.

Identifying and defining purpose

In our interactions with wealthy individuals and their families, we have worked through different and sometimes extreme purposes or uses for their wealth. Some purposes are tied to charity and giving back to communities while others are to establish a family legacy through the establishment of a Trust that is intended for succeeding generations of beneficiaries and family members.

To help identify and define the purpose, some questions to be answered include:

• What does success mean to you?
• What are the values, traits and practices that underpin success for you?
• What does your wealth allow you to do today?
• What do you want your wealth to help you do in the future?
• If you had more wealth, how would your life be different?
• On a scale of 1 to 10, how important is leaving a financial legacy/inheritance to your heirs, family, dependents vis-a-vis leaving it for charitable purposes?
• What are the risks to your wealth in the short term and long term?
• Could you identify 3 main ambitions you have as well as 3 critical concerns and worries?

Articulating a purpose for wealth helps individuals and their families to have clarity and set clear objectives for their wealth and to make better decisions with respect to wealth preservation, sustenance, transfer and intergenerational legacy.

In conclusion, we acknowledge that wealth is only beneficial where it acts as a catalyst and helps individuals, families and their communities to lead meaningful lives and actualize their potentials as human beings.

At Fiduciary Services Limited Limited, our purpose is to identify the potential impacts that threaten the continuity of an individual or family’s wealth, posterity, and legacy. We leverage on the combined expertise of over 60years in advising High Net Worth individuals and their families on Asset Protection,  Trusts, Estate planning, Family governance, Taxation and Philanthropy.