Article initially published in Ynet Capital on 27.04.2025
An estimated USD 31 trillion is expected to be transferred to the next generation over the coming decade. However, without precise planning and open communication, family wealth can become a source of conflict and financial disintegration.
While intergenerational asset transfer is often perceived as a technical process involving tax planning and wealth distribution, it is, in reality, fraught with human challenges. A study by Altrata estimates that in the next decade alone, approximately 1.2 million individuals with at least USD 5 million in assets will transfer around USD 31 trillion to their heirs. Of this, about USD 19.9 trillion will come from approximately 155,000 individuals with assets exceeding USD 30 million.
Bank Lombard Odier, one of the oldest and most respected private banks globally, has been advising affluent families worldwide for over 225 years, with a tradition of conservative, innovative, and sustainable wealth management. In a conversation with Adel Barakat, Global Head of Wealth Planning at Lombard Odier Group, we sought to understand the main obstacles in this sensitive process, the mistakes to avoid, and how to plan wealth transfers to ensure not only financial security but also long-term family harmony.
Why is intergenerational wealth transfer considered such a complex challenge, even among cohesive and established families? Are the difficulties mainly emotional, or do legal, business, or cultural factors also play a role?
In my view, the greatest challenge in planning wealth transfer stems primarily from the fact that the process deals with painful or unpleasant topics such as incapacity or death. It’s a highly emotionally charged subject, as it touches on more than just money – it involves family emotions, identity, power, values, and legacy. It’s not surprising that many families postpone the topic repeatedly – in fact, many families do not discuss inheritance planning and asset transfer openly. Parents may avoid these conversations to “protect” their children or operate under the assumption that their values are clear even without explicit discussion.
Additionally, it’s often very challenging to plan with a long-term perspective, considering future changes. Beyond personal changes, families are becoming more international and mobile. Therefore, finding solutions that fit different legal situations becomes increasingly complex, complicating legal compliance, taxation, and regulation issues. Equally important – the legal and tax environments change over time, and a solution that is appropriate at a certain point may become entirely irrelevant as the law evolves.
What are the most common mistakes you encounter among the founding generation when preparing for family wealth transfer?Especially concerning taxation and the transfer of family businesses.
One common mistake we all make is thinking there’s no rush and that we have time to handle things. As a result, it’s not uncommon to see parents forced to organise their estate quickly.
Another mistake is thinking that all types of assets can be consolidated under one structure that will reduce the tax burden, protect the assets, and take care of heirs and vulnerable family members, wherever they live.
Read also: Through the generations: the transfer of family businesses is accelerating
Unfortunately, such magic solutions do not exist. On the contrary, inheritance planning is a complex and ongoing process that needs to take into account not only the personal and financial situation of the founding generation but also that of each heir individually.
Regarding business continuity, one common mistake I see in families is when fathers or mothers assume they understand their children’s aspirations, and that their children will necessarily want to follow in their footsteps. Often, these assumptions lead to conflicts due to a lack of communication within the family.
How can open and healthy communication be established between the older generation and younger heirs, especially when there are differences in values, lifestyles, or attitudes toward money?
Establishing open communication between generations is indeed a significant challenge. In most cases, communication is the Achilles heel of families and family businesses – if it doesn’t exist, is insufficient, or of poor quality, it directly leads to conflict. To communicate effectively, it’s important not only to know how to speak, but also to know how to listen. During periods of wealth transfer, when all senses are heightened, it is important to pay particular attention to communication.
Here are some strategies to promote effective communication:
- Recognise and respect differences: It’s important to acknowledge and appreciate differences in values, lifestyles, and attitudes toward money between generations.
- Find common ground: Focus on points of agreement rather than differences.
- Encourage education and awareness: For example, educate both generations about the cultural and generational differences that influence their perceptions.
- Promote open dialogue: Schedule regular family meetings for discussions and updates and encourage open and honest dialogue where everyone can express their opinions and concerns.
- Set clear goals: Identify shared goals for both generations, such as the family’s long-term well-being and wealth preservation. Develop a shared vision for the future that encompasses the values and aspirations of both generations.
- Involve mediators or professional advisors: Consider engaging a professional mediator or family therapist to manage discussions on sensitive topics, as well as financial advisors or estate planners to provide objective advice and bridge generational gaps.
There’s a common perception that it’s important to transfer not only wealth but also values, responsibility, and worldview. How is this done in practice? Are there tools or methods that can help pass on the family’s “DNA” to the next generation?
Transferring family values, vision, and mission to the next generation is indeed critical for preserving family identity and legacy. This can be achieved through various methods, such as:
- Sharing stories about the family’s history, achievements, and challenges: These stories can strengthen a sense of belonging and pride.
- Maintaining family traditions: Organise family gatherings, celebrations and rituals that reflect the family’s values. You can also incorporate customs that reinforce the family’s identity and cohesion.
- Establishing mentoring programmes: Through these, older family members can guide young people and help them understand the family’s values and responsibilities. You can also hold workshops or lectures on ethical behaviour, social responsibility, and more.
- Drafting a family constitution or mission statement: This should include the values, principles and vision of the family.
- Engaging in philanthropic activities or community projects that reflect the family’s values and social commitment.
- Leading through personal example: This demonstrates integrity, responsibility, and empathy, and recognises young people who demonstrate these values .
What distinguishes families who succeed in planning their inheritance as opposed to those in which the process leads to internal conflicts? Is it a matter of personality, early preparation, or something else?
Successful succession planning often hinges on several key factors that go beyond wealth itself.
In my opinion, the most important factor for success is early and open communication, as well as transparent discussions. In my experience, families that engage in honest conversations about inheritance, values, expectations, roles and plans early on tend to avoid misunderstandings and conflict. Keeping all family members informed about any changes to the estate plan helps maintain clarity and trust. Having a well-drafted will and estate plan that clearly outlines the distribution of assets and responsibilities also minimises ambiguity. Ensuring that the distribution of assets is perceived as fair by all heirs can prevent feelings of resentment and disputes.
Read also: The advantages of taking a multi-generational approach to your wealth
The set-up of estate planning structures such as Trusts can sometimes also help facilitate discussions and preserve harmony within the family. In this case, the intervention of an impartial third party can help navigate sensitive topics and provide balanced solutions.
Secretive planning is to be avoided in all cases –– when succession plans are kept confidential or not discussed openly, this inevitably leads to misunderstandings and mistrust among family members. Unexpected decisions revealed after the death of the estate holder can cause shock and disputes, while unequal distribution of assets without clear explanation can lead to feelings of injustice and rivalry.
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