Everyone strives towards securing financial stability for their children, grandchildren, and even their great grand-children. However, it is not uncommon for inherited wealth to be depleted in less than three generations. In fact, 70% of families lose their wealth in the 2nd generation, according to NASDAQ.

To ensure the longevity of generational wealth, it is crucial to consider multiple aspects of estate planning. Apart from devising a plan to grow wealth in the present, it is equally important to prepare beneficiaries for an inheritance in the future. Here’s a guide on how to approach estate planning in a manner that will endure for generations.

Making a Plan

Creating a comprehensive generational plan involves both the labor of preparing legal documents and taking the time to develop a detailed outline that will determine exactly how your wealth will be dealt with after you pass away. To initiate the planning, there are several steps you can undertake now.

It is crucial to bear in mind that generational wealth planning differs from simply designating gifts for your children and grandchildren through estate planning. When creating a generational plan, it is essential to be mindful of future generations, including those you may never meet. Although it may seem challenging, try to envision your family as individuals who have yet to encounter you. The primary objective of generational wealth planning is to transfer your assets to those who are yet to be born. However, it can be difficult to balance their needs with those of the family members you already know and cherish.

The Most Important Conversation

According to a Fortune survey, 83% of investors are concerned about transferring assets smoothly, but only 40% said they’ve had discussions with heirs regarding their wishes. To ensure that your wealth will flow over your children, their children, and even your great-grandchildren, it is vital to communicate your intentions with your family. Everyone will have to be on the same page when it comes to leaving this legacy because a lot goes into it.

If you are the head of the family, you are your loved ones’ best resource for providing guidance and wisdom in this regard. Avoid the mistake of assuming that your money and values must be kept confidential. Instead, take the time to educate your children and grandchildren by sharing your vision with them to prevent confusion and frustration. This presents an excellent opportunity to involve your financial advisor, who can assist in communicating your vision and addressing any technical questions that may arise.

Putting it in Writing

To establish a comprehensive generational plan, it is recommended to follow two primary phases. The first phase involves preparing legal documents, while the second phase entails developing a detailed plan that outlines how your beneficiaries should manage your wealth after your passing. To commence the planning process, there are several steps you can take now. It is essential to specify how the money should be utilized, accessed, and replenished. With proper planning, it is feasible for your wealth to be invested in higher education, starting a business, or other ventures that will aid in growing your family’s wealth for decades to come.”

Create a Support System

Are you aware of your assets’ sustainable withdrawal rate? It is possible that you may not be familiar with it. If you lack this knowledge, it is improbable that your heirs will possess it either. Understanding this and other technical aspects is crucial for preserving wealth for future generations. Therefore, collaborating with a team of financial experts could be your best opportunity for a successful generational wealth transfer. They can work with you individually to determine your objectives, create a plan, educate your heirs, and assist them in staying on course.”

Why Wealth May Fail to be Transferred

All investors want their legacy transfer to go smoothly, but several things can go wrong when a family tries to pass its wealth down to the next generation. To keep your own wealth transfer on track, keep these four common pitfalls in mind.

  • Lack of trust and/or communication
  • Lack of understanding which can lead to uncertainty
  • Inadequate preparation, overlooked essentials
  • Difficulty sharing a vision

What Next?

Financial professionals exist to offer guidance to families in critical times. Enlisting the help of wealth managers, tax professionals, and estate planning attorneys can allow you to take advantage of all the resources that are available to you in this process. A Wealth Manager can connect you with individuals most people do not readily have connections with, such as estate planning attorneys and tax professionals. An “A-team” is what you want – a group of professionals who can work in tandem to ensure your plan will meet its intended goals. They can even aid in communicating with your family members. When you have someone that can understand your vision and help you put it into action, you will feel empowered throughout the whole process.

Attempting to navigate the complexities of family wealth is challenging, but with open communication and the guidance of a trusted Wealth Management professional, you can begin to implement these guidelines in your own family. It’s never too early or too late to have these important conversations and help set your loved ones up for success and for generations to come.


Important Disclosures:

The information in this article is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. This material was prepared by InVestra Financial Services. Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent, you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.

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