Successfully transferring wealth between generations of a family can be difficult, especially in Asia.
When wealth is passed down to younger generations of a family, it tends to dissipate over time, if it is not carefully managed. The wealth is naturally divided as a wealthy parent might divide everything equally between his three children. They will eventually further divide it between their own multiple children.
Unless the younger generations successfully protect the wealth that they inherit and grow their slice of it, there may be little of the wealth left.
In some places in the world, it is more difficult than in others to manage intergenerational wealth. Studies have shown that it is particularly difficult in Asia, with intergenerational transfers of high wealth having a failure rate of 70%.
Large family operated businesses in Asia also lose an average of 60% of their value when the founder passes away, as the Wills, Trusts & Estates Prof Blog discusses in "Death And Taxes: How To Effectively Transfer Wealth Amidst Asia's Aging Population."
One of the reasons for this problem in Asia, is that most countries on the continent have high estate or inheritance taxes. The other reasons include a lack of planning for succession. It also seems that younger family generations do not exercise the same stewardship of wealth as their elders who created the wealth.
Asians are planning around their high failure rate of wealth transfer, by purchasing life insurance to avoids high estate taxes.
Transferring wealth to younger generations works better in the U.S. However, it still requires proper estate planning to make sure the right tools are used for successful transfers.
For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Wills, Trusts & Estates Prof Blog (Jan. 15, 2018) "Death And Taxes: How To Effectively Transfer Wealth Amidst Asia's Aging Population."