As wealth passes between generations, the biggest challenge is often not transferring assets, but preparing heirs to take responsibility for them.
A massive transfer of wealth is underway and most families are focusing on the wrong problem. Globally, this is known as the great wealth transfer. Cerulli Associates estimates that $84.4 trillion will move between generations in the United States alone by 2045, largely from baby boomers to Gen X and millennials.
In South Africa, the numbers will differ, but the underlying reality is the same: a generation that built wealth through businesses, retirement funds, property, trusts, and investments is preparing to pass it on.
For many families, the focus is on the technical aspects of this transition. Ensuring there is a valid will, reviewing beneficiary nominations, managing estate duty, structuring trusts correctly, and maintaining sufficient liquidity in the estate.
All of these are important. But they are not the most important question. The real risk is not whether the money is ready for the next generation. It is whether the next generation is ready for the money.
More than an estate planning exercise
In A Guide to Multi-Generational Planning, published by Financial Broker, Brokers Ireland, and authored by Eamonn Twomey of StepChange, one idea stands out: advisors need to “prepare the family for the money, as much as preparing the money for the family”.
This captures the challenge many South African families now face.
We spend years building businesses, accumulating capital, and creating financial security. Yet far less time is spent helping the next generation understand what that wealth is for, how it should be managed, and what responsibility comes with it.
In South Africa, this challenge is often more complex.
Family wealth is frequently concentrated in illiquid assets such as businesses, farms, or property. Children may be living in different countries. Some may be involved in the family business, while others are not.
Add trusts, offshore structures, blended families, and differing financial priorities, and it becomes clear that inheritance is about far more than legal structures. It is about people.
When wealth outpaces preparation
Consider a simple scenario. A family’s primary asset is a successful business. One child has spent years working in that business. Another has emigrated and built a life elsewhere.
Without clarity and communication, this situation can quickly create tension, regardless of how well the estate is structured. This is not uncommon. In many families, future conflict will not be caused by poor investment decisions or tax inefficiencies. It will be caused by assumptions, unclear expectations, and perceived unfairness.
The missing conversation
At the centre of this issue is a question many families never fully address: What is the purpose of this money?
For some, it is about multi-generational financial security. For others, it may be education, entrepreneurship, preserving a business, supporting family members living abroad, or contributing to charity.
There is no single correct answer. The problem is that, in many cases, the question is never asked. Without a shared sense of purpose, wealth can become fragmented.
One generation builds it, the next consumes it, and by the time it reaches the third generation, very little remains. This is not necessarily due to irresponsibility – often it is because the next generation was never included in the journey.
They were not taught how the wealth was created, why certain decisions were made, or what the family hoped the money would ultimately achieve.
Start with the basics
This does not mean families need to disclose every financial detail. There is still a role for privacy, discretion, and timing. However, it does mean that structured conversations should take place before a crisis forces them.
A practical starting point is within the immediate household. Does your spouse or partner understand the overall financial plan? In many cases, one person manages the relationships with the adviser, accountant, and attorney.
If that person passes away, the surviving partner may be left making complex decisions during an already difficult time. From there, the conversation can gradually extend to children.
Do they understand the purpose of a trust? Do they know who to contact if something happens? Do they understand the difference between retirement capital, discretionary investments, and business assets?
Have you explained why certain decisions may not be equal, even if they are fair? These discussions are not easy. But silence is often far more damaging.
The role of the financial planner
This is where the role of a financial planner becomes increasingly important.
Not as a replacement for the attorney, accountant, or fiduciary specialist – each plays a critical role. The attorney may assist with legal agreements, the fiduciary specialist structures the estate, and the accountant understands the tax and business position.
But someone needs to bring these pieces together. In practice, the financial planner often becomes the coordinator ensuring that the financial plan, estate structure, tax strategy, and family objectives are aligned. This role becomes even more critical during a wealth transfer.
Without it, families can end up with technically sound structures that fail in practice because no one aligned the plan with the people it is meant to serve.
Where to start
For families beginning this process, a few principles can help:
- Secure your own position first. Supporting children during your lifetime can be meaningful, but should never come at the expense of your own financial independence.
- Define the purpose of your wealth. This goes beyond estate planning. It requires clarity around values, responsibility, and long-term objectives.
- Involve the right professionals. Work with advisers who can guide the process holistically, not just implement isolated solutions.
- Start early. The best time to prepare the next generation is while you are still able to guide the conversation, explain your thinking, and share your values.
A different measure of success
The great wealth transfer is often discussed in terms of how much money will move from one generation to the next. But the amount is not the most important part.
What matters is how well families prepare for it. Because wealth does not fail because of markets or structures. It fails when the people inheriting it are not ready.
The families that will navigate this transition successfully will not necessarily be those with the most sophisticated structures or the largest estates. They will be the ones who took the time to prepare the next generation, define the purpose of their wealth, and surround themselves with the right guidance.
In the end, the greatest legacy may not be the capital we leave behind, but the wisdom, discipline, and sense of responsibility we transfer with it.
