Three ways to secure a lasting legacy as you pass your money to next generation

In the next couple of decades, more than $100 trillion (£74.8 trillion) of global wealth is expected to pass from one generation to the next. But many of the world’s wealthy are worried about securing a legacy that reflects their values, according to a new report.

Wealthy individuals who don’t set out a clear plan for their money face the risk of family conflict, missed opportunities and the erosion of their fortunes as the Great Wealth Transfer unfolds.

It’s not just financial assets that could be lost over time, but non-financial wealth. In a survey of 1,000 wealthy individuals around the world, nearly three quarters (72%) said their legacy is defined more by the passing on of their values than their financial inheritance, HSBC Private Bank found.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

When it does come to inheritances, opinions vary among the wealthy on how they want to spend or pass on their assets. One third (35%) want to enjoy it with their family rather than pass it on after their death. Just over a quarter (28%) want to pass it on while alive, and less than a quarter (23%) plan to do so after their death.

How to create a lasting legacy

Even as wealthy individuals concentrate on building their fortunes, many remain uncertain about what they want their wealth to achieve after they are gone, despite a desire for their legacy to reflect their values, the HSBC report found.

But the wealthy individuals who are best equipped to create a lasting legacy, according to the findings, have done three very specific things:

Set out a wealth philosophy

By having a clear set of intentions for their assets, wealthy individuals can identify the purpose of their fortunes, and the values that the senior generation wish to preserve for the future.

This helps most when it is written down in black and white, so there can be no confusion about wishes. So as well as a formal and legally binding will, many legal experts now recommend a letter of wishes too.

Russell Prior OBE, head of family governance, family office advisory and philanthropy at HSBC, said: “Many wealth creators are so busy building their fortunes that they have under-invested in preparing the next generation.

“What they need is a clear, well-developed wealth philosophy, involving a much wider set of considerations, than just setting out plans for their financial assets.”

Engage the family

Early and open communication is crucial when discussing inheritances and legacy planning. But conversation can be difficult when some parents lack confidence in their children’s readiness to manage wealth.

The survey reflects this – more than two thirds (70%) of those asked said they want to delay transferring their wealth to help instil financial responsibility into the next generation.

Ann Ling, head of wealth planning and advisory for Asia Pacific at HSBC, said: “Wealth brings freedoms and a lot of convenience, but at the same time, the senior generation know there are also many responsibilities.”

Similarly, children can also feel pressure from that burden of expectation, as they are often worried about making mistakes. As their parents have often been so successful in business and creating wealth, they often feel they are unable to measure up.

This is why strong communication channels between generations are crucial. “From my experience, I've never seen people complain about having the family discussion too early,” Ling said.

“To achieve a lasting legacy, families need open communication about what they are passionate about and can unify around.”

Unify behind a cause

One way to build family unity is to back a cause all members can support. Within the Great Wealth Transfer, approximately $18 trillion (£13.4 trillion) is expected to go to good causes, according to analysis by Cerulli Associates in 2024.

“Philanthropy can be a powerful way to create a legacy that can last long after the wealth creator has gone, and which can simultaneously unify the family,” said Prior.

Charitable giving is also a smart estate planning strategy that can mean your loved ones avoid some inheritance tax.

Ultimately, planning ahead is essential. Family members that engage with each other on the purpose and impact of their collective wealth will be well placed to build something enduring.

Ling said: “Combining aligned philanthropic values with good planning gives a legacy relevance and energy. This will also help to perpetuate harmony in future generations.”

But failing to do so brings risks that go beyond financial inefficiency: it can create conflict that threatens a lasting legacy.