How to prepare an heir for the $84 trillion wealth transfer including the red flags

As an estimated $84 trillion in assets moves between generations in the coming decades, many families are focused on taxes, market volatility, and legal structures.

Chad Maggard, managing director of the Family Office team at Johnson Investment Counsel, says that focus often misses the most significant threat of all.

“The most overlooked risk isn’t taxes, new law provisions or market performance, but underprepared heirs,” Maggard told InvestmentNews. “Oftentimes, families will spend a significant amount of time optimizing their estate structures and assets, but far less time preparing the people who will inherit them.”

When preparation lags behind wealth, the consequences can extend well beyond finances.

“When wealth moves faster than maturity or financial judgement, the results can be destructive to the inheritors and family relationships,” Maggard explained. While technical planning remains essential, he emphasized that it is not sufficient on its own. “Financial planning is crucial in preparing for this transition, but equally as important is building the fundamentals of trust and understanding of heirs.”

When to start talking about wealth

One of the most common questions families ask is when heirs should be brought into wealth discussions. Maggard cautions against searching for a universal answer.

“There is no single ‘right age,’ but in my experience, college age or early adulthood becomes a natural entry point to start discussing estate plans,” he said. At that stage of life, “real financial decisions start presenting themselves – first jobs, benefit packages, housing, etc.”

That said, Maggard believes the groundwork should be laid much earlier. “Conversations about financial literacy should begin earlier to best prepare inheritors,” he noted. Practical exposure can take many forms: “Simple ways to build that financial literacy muscle include having your children practice saving with a purpose, budgeting for real expenses, involving them in a portion of charitable donations, giving allowances tied to responsibility and just merely talking about money decisions regularly as a family.”

In Maggard’s experience, most wealth transfer failures have little to do with flawed spreadsheets.

“Wealth transfer plans are far more likely to encounter problems because of family dynamics than because of purely financial mistakes,” he said. “Even the most technically sound plan can falter when beneficiaries are unprepared or when family members serving in fiduciary roles struggle to separate personal relationships from their responsibilities.”

This is where proactive engagement becomes critical. “A core part of our role is to anticipate these issues early and help families engage in meaningful conversations about expectations, responsibilities, and decision making,” Maggard explained. “Education across generations is essential — ensuring that heirs understand not just what they will inherit, but why the plan is structured as it is.”

Clear communication is key

Clear communication can prevent unnecessary strain later, Maggard stressed.

“These discussions reduce the emotional and logistical friction that can arise during future transitions,” he said. In some cases, structure matters just as much as dialogue. “We also find that some tension can be avoided through thoughtful governance, such as appointing a qualified independent or corporate trustee.”

An outside fiduciary, Maggard added, “brings objectivity, continuity, and procedural rigor, which helps preserve family harmony and keeps decisions aligned with the grantor’s intent.”

While total breakdowns are uncommon, he warned that “vague provisions or uncommunicated intentions often cause avoidable stress at difficult times.” The advisor’s role, he said, is clear: “Our job is to identify those gray areas and guide clients toward clearer, more resilient plans that balance both financial and relational considerations.”

How to prepare an heir

Preparing the next generation requires more than classroom-style education.

“Education is a component of preparing an heir, but gradual exposure and responsibility in practice also plays a role,” Maggard said. One effective method is using controlled, real-world experience. “One of the ways we integrate this in wealth planning is by setting up annual exclusion gifts that act as practice capital.”

Responsibility increases over time. “Once the heir turns a certain age or marks a milestone, they will slowly take on more responsibility, such as interacting with their advisors or having shared control as a co-trustee,” he explained. This progression offers valuable insight. “This has become an excellent indicator of how one might use discernment in spending their inheritance within the context of their spending versus sustainability.”

Maggard believes that families who succeed across generations normalize conversations about money.

“Talk about money frequently and often as family, and with context,” he said. “Making money a regularly discussed topic in households can help instill financial literacy and give full visibility to the ways in which the CFOs of the household spend money.”

Formalizing values can further anchor those discussions. “A family mission or values statement that includes philanthropic values is also one of the most effective tools that we encourage donors to create,” Maggard said. Such a framework “explains how wealth was generated, what it’s meant to support specifically and what responsible use looks like.”

Without that story, he warned, “wealth becomes a balance-sheet number instead of a stewardship responsibility.”

Spotting the red flags

Certain warning signs signal that a family may be unprepared for a significant inheritance event.

“A few common red flags that I’ve encountered include very loose trust provisions at young ages, no education around sustainable spending and zero communication about expectations of values,” Maggard said. Again, practical gifting strategies can be revealing. “The annual gifting practice I previously mentioned gives an idea of how prepared heirs are for when the time comes to inherit wealth.”

When problems arise, they are rarely accidental. “In situations where inheritors may prove themselves untrustworthy to take on generational assets, it is often due to a miseducation or a lack of purpose or accountability,” he explained. That reality underscores the need for discipline. “This is why advisors and donors must take a conservative, proactive approach in building out generational wealth plans – these warning signs can often be prevented with proper time and preparation behind it.”

If families could do just one thing this year, Maggard says it starts with clarity.

“For those leaving wealth behind, ensure your plan is fully-flushed out with your advisor before looping in a familial recipient,” he said. One question consistently surfaces: “The number one question I hear from my clients is ‘Am I leaving too much to my kids, and what is the right amount?’”

His advice is to begin early and deliberately. “Start planning early with a financial professional, and then bring in your heirs. Also start the conversation if you haven’t already.” That means ongoing engagement. “That means reviewing the plan annually and clearly articulating why decisions are being made.”

Modeling outcomes can help align expectations. “We’ve found that going through the exercise of modeling out the wealth that might be passed on to future generations at various points in time is productive,” Maggard said. “It brings clarity to the planning process and decisions that are ultimately made, such as how much gets directed to family versus charity.”