By Jeffrey Meenes, CFP® (Published Date June 2, 2022)
It’s common to want to leave money behind for children and family members after death. After spending years working to earn and build wealth, individuals are proud to leave behind a legacy and help their future generations start off on a better foot.
But there's a common saying regarding generational wealth - "Shirtsleeves to shirtsleeves in three generations." The idea is, by the third generation of wealth being passed down, it's primarily gone.
But, not all hope is lost. There are a number of steps you can take now to proactively protect your wealth and provide for your heirs. Developing a generational wealth plan, openly and regularly communicating with your loved ones, and working with a team of professionals can give your wealth a better chance at lasting for generations to come.
Creating a Generational Plan
The making of a generational plan consists of two parts. First, the legal documents. Then, a detailed plan outlined in a way that clearly states how your beneficiaries should address your wealth after your passing.
Think Ahead, Far Ahead
It’s important to remember that generational wealth planning is a bit different than simply designating gifts for your kids and grandkids in your will. When you start making a generational plan, you consider the generations that will follow those kids and grandkids, as well. These will include heirs you won’t even meet. If your goal is to build a thread of wealth upon which multiple generations can benefit, you may even need to think sixty, seventy, or eighty years into the future.
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. This helps to increase buy-in from family members and reduce family liabilities that could derail your plans.
You are your family’s best resource for wisdom and guidance when it comes to this topic, so don’t make the mistake of thinking that your money and values need to be kept secret. I once had a very intelligent professional client share with me that growing up her grandfather and parents felt kids should be kids and not have to worry about money. She lost both of those role models at a young age and wished she had been able to learn more from them about their family’s estate before their passing.
Take the time to educate your children and grandchildren and share your vision with them so that they aren’t left feeling confused and frustrated. For many families, 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. They can also act as a mediator if conversations get tough or contentious, keeping everyone focused on the greater task at hand of preserving wealth for the benefit of all.
Put It in Writing
Putting your plans in writing can rid future generations of potential doubt or confusion regarding your wishes. After all, your heirs are the ones who will truly be carrying out your generational wealth plan after you are gone. You’ll want to make sure they, as well as any legal counsel appointed to assist them, are clear on your vision.
Make sure you specifically identify how transferred wealth be used, how it can be accessed, and how it should be replenished. With proper planning, it’s possible that your money could be used to invest in higher education, start a business, or other ventures that will help your family 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 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.
If you’re ready to start creating a generational wealth plan, schedule a call with Meenes Wealth Partners today. We can help you begin the planning process, speak to your family members, and answer any questions you may have about the journey. With the right foresight, the seeds you plant today can provide for generations of your posterity in the future.