Wealth planning is common for people who want to leave money behind for their children and family members after death. After spending years working to earn a living, people are proud to leave behind a legacy and help their future generations to be better off.
Sometimes we work with folks who save their whole lives and accumulate substantial assets. But they also collect a pension during retirement, and that, plus Social Security, is more than enough for them to live on. Although they may be older and fully retired, they don’t need to tap their investments.
This is really important to figure out as early as possible as it significantly impacts how the investments will be handled. If the assets are being managed for your children, grandchildren, and beyond, they will be managed quite differently compared to if you were drawing them down in retirement.
It’s impossible to predict the future, but there are things you can do now to proactively protect your wealth and your heirs.
Here’s how you can approach estate planning in a way that will last for generations, otherwise known as generational wealth planning.
Generational Wealth Planning
The making of a generational plan consists of two parts. First, the legal documents. Second, you will need a detailed plan outlined in a way that clearly states how your beneficiaries should address your wealth after your passing. There are several steps you can take now to begin the planning process.
Think Ahead, 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 start making a generational plan, you need to be considerate of future generations – even the ones you’ll never meet.
It may be hard, but try to think of your family as people you haven’t even met yet. The point of generational wealth planning is to pass your assets down to those who haven’t been born yet, but it can be hard to try to consider their needs alongside the family members you already know and love.
Think in terms of options. What options do you want to leave for your children and their children? Having “the most money possible” is not a tangible enough goal, it’s important to think as specifically as possible.
Have Conversations With Your Family
If you want your wealth to last for generations, it’s crucial that you communicate your desires with your family. Everyone must be on the same page when it comes to leaving a legacy for future generations.
You are your family’s best resource for wisdom and guidance when it comes to this, so don’t make the mistake of thinking that your money and values need to be kept secret. Take the time to educate your children and grandchildren, sharing your vision with them so that they aren’t left feeling confused and frustrated. This is an ideal opportunity to involve your financial advisor, as they can help you communicate your vision and answer any of the more technical questions your family may have.
Put It in Writing
Putting your plans in writing can rid future generations of potential doubt or confusion regarding your wishes. Your heirs are the ones who will truly be carrying out your generational wealth plan after you are gone.
Make sure you specifically identify how the money should be used, how it is accessed and how it is replenished. With proper planning, it’s possible that your money could be used to invest in higher education, starting a business or other things that will help your family grow their wealth for decades to come.
Create a Professional 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 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 with the right system of financial professionals could be your greatest chance at successful generational wealth transfer. They will have the advantage of working one-on-one with you to determine your goals, develop a plan, educate your heirs and help them stay on track.
Tax location is really going to come in to play here. So it is incredibly important this wealth is held in the right vehicles and the assets are drawn down in a way that minimizes taxes for your heirs.
If you think you’re ready to start creating a generational wealth plan, remember to have a clear vision and share that vision with your family members. Communication is going to be key here. Not only with your family members, but with your financial professionals as well.
Creating a generational legacy can be extremely rewarding. It won’t be easy, but it will surely be satisfying. It’s never too early to start thinking about planning for the legacy you want to leave behind!
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