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Why 70% of Wealthy Families Lose Their Wealth by Gen 2—and How to Avoid It

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A 20-year global study of more than 3,000 families revealed a staggering truth:


70% of wealthy families lose their wealth by the second generation.

90% lose it by the third.


The three most common reasons:


  • Poor communication

  • Unprepared heirs

  • Weak estate, tax, and liquidity structures


This isn’t because of bad markets or poor investment decisions. It’s not inflation or rising taxes.

It’s something more human—and more avoidable.


The study, led by Roy Williams and Vic Preisser, found that wealth erosion is typically caused by three “silent killers”:


The Three Silent Killers of Family Wealth:


1️⃣ Communication breakdowns (60%)

2️⃣ Unprepared heirs (25%)

3️⃣ Weak structural firewalls—tax, legal, liquidity (15%)


Let’s break each one down—and how you can protect your legacy against them.


💬 1. Communication Breakdowns (60%)


This is the most common and most damaging cause of wealth collapse.Families don’t talk about money—until it’s too late.

In most households, financial topics are either off-limits or vague. Parents don’t want to create dependency or entitlement. Children don’t know how—or when—to ask. And as a result, when wealth changes hands, it comes with surprise, confusion, or conflict.

In one case I’ve seen, siblings learned about their roles in the family business after the founder passed—and hadn’t spoken since. Not because they didn’t care, but because no one prepared them for what was coming.


How to fix it:

  • Host regular family meetings (even just once a year)

  • Share not just what you’ve built, but why

  • Use a family mission statement or legacy letter

  • Bring in a facilitator to lead difficult conversations if needed


If money is the last thing you talk about, it will be the first thing people fight over.

🧒 2. Unprepared Heirs (25%)


Many heirs are well-educated—but not wealth-prepared.


They inherit assets without understanding tax consequences, liquidity needs, investment structures, or governance responsibilities. They’re handed portfolios, properties, or business shares with no roadmap.


Without preparation, two things happen:


  • They hand off decisions to third parties they barely understand

  • Or they freeze and avoid acting altogether


Both paths lead to erosion.

How to fix it:


  • Start financial education early—well before any transition

  • Create structured “shadow” roles within the business or family office

  • Give heirs room to make small, safe mistakes and learn from them

  • Assign accountability—not just entitlement


One of the most effective tools we use is a “prove-it phase,” where heirs must meet clear benchmarks (knowledge, behavior, decision-making) before they gain control.

Being a beneficiary is a legal status. Being a steward is earned.

🧱 3. Weak Structural Firewalls (15%)


Most estate plans look “complete” on paper—but collapse under real-world stress.

Common issues we see:


  • No liquidity to cover taxes or buyouts

  • Cross-border exposure (e.g. U.S. assets held by foreign nationals, or vice versa)

  • Outdated trusts with misaligned distribution rules

  • Advisors working in silos (CPA doesn’t speak to attorney, who doesn’t speak to investment team)


These aren’t one-time decisions. They require ongoing review and coordination.


How to fix it:


  • Review your plan every 1–2 years or after any major family/business event

  • Model different "what-if" scenarios (divorce, incapacity, forced sale, sudden death)

  • Ensure your tax, legal, investment, and insurance advisors are aligned

  • Make sure the structure matches the strategy

Planning is not about having documents. It’s about having clarity.

🧠 Bottom Line


What kills legacy isn’t the economy. It’s the disconnect between:


  • What the founder intended

  • What the next generation expects

  • And what the structure actually supports


The families that succeed don’t leave this to chance.They:


  • Communicate early and often

  • Train the next generation intentionally

  • Design structures that evolve with time

  • And treat family planning like enterprise risk management


They plan like their legacy depends on it—because it does.


📎 Want to Know Where the Cracks Are?


My team developed a 1-page Family Resilience Scorecard to help families spot weaknesses before they become irreversible.


📩 If you’d like a copy, request it here: info@ifg.one. No funnel. No opt-in. Just value.



 
 
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