It’s common for people to want to leave money behind for their children and family members after death. After spending so many years working hard and saving money, people are proud to leave behind a legacy. They want to help by making their future generations more financially stable. All this is well and good but there's a common saying regarding generational wealth - "Shirtsleeves to shirtsleeves in three generations." The idea behind the saying is, by the third generation of wealth being passed down, it is primarily gone. With that being said, there are things you can do to be proactive and protect your wealth and your heirs. Developing a generational wealth plan, communicating with your loved ones and working with a team of trusted professionals can give your wealth a better chance at lasting for generations to come.
Here’s how you can approach estate planning in a meaningful way so that it can last for generations, otherwise known as generational wealth planning.
Creating a Generational Plan
There are two main parts in a generational plan. First, the legal documents. Second, you will need a detailed plan outlined in a way that clearly states how, after your passing, your beneficiaries should address your wealth. There are several steps you can take now to begin the planning process.
Think Ahead, Far, Far Ahead
It’s important to remember that generational wealth planning is a bit different from designating gifts for your kids and grandkids through estate planning. When you begin making a generational plan, you need to consider future generations - even the ones you’ll never meet. It may be difficult, but try to think of your family as people who haven't even met you. The goal of generational wealth planning is to protect your assets so they pass down to those who haven't been born yet, but it can be challenging to try to consider their needs alongside the family members you already know and love.
Talk With Your Family
If you want your wealth to last for generations, it’s crucial to communicate your aspirations with your family. Everyone must be on the same page when it comes to leaving a legacy to benefit future generations.
This is your money and you will be your family’s best resource for wisdom and guidance when it comes to this. Do not make the mistake of thinking that your money and values need to be kept a secret. Take the time to inform and educate your children and grandchildren, sharing your vision with them so they aren’t left feeling confused and frustrated. This is an ideal opportunity to involve your financial advisor by introducing them to your children. They are in a great position to help you communicate your vision and answer any of the more technical questions your family may have.
Put Pen To Paper
Detailed discussions are important but putting your plans in writing can rid future generations of potential doubt or confusion regarding your wishes. Your heirs are the ones who will be carrying out your generational wealth plan after you are gone.
Make sure to be specific when you dictate how the money should be used, how it should be accessed and how it should be replenished. With proper planning, it is possible that your money could be used to invest in higher education, starting a business or other things that will help your future generations grow their wealth for decades to come.
Create a Support System
Do you know what a sustainable withdrawal rate is for your assets? It's possible you may not. And if you don't know, it's highly unlikely your heirs will know this either. Understanding this, along with a number of other technical details, is an important part of maintaining wealth for decades to come. This is why working closely with the right combination of trusted professionals could be your greatest chance at successful generational wealth transfer. They will take the time to work one-on-one with you to determine your goals, develop a plan, educate your heirs and help them stay on track for years to come.
If you think you’re ready to begin creating a generational wealth plan, remember to have a clear vision and clearly share that vision with your family members. It is important to put these wishes into legal documents, as well. Your trusted financial professional can help you begin the planning process. They can sit down with you to hash out the details, speak to your family members and answer any questions you may have.