Protecting and Passing Down Your Financial Legacy

When it comes to passing on your wealth to your family, it is important to know the best ways to manage the process. An estimated 90% of wealthy families lose their wealth by the third generation, so if you are planning on leaving behind assets to your family, knowing the unique risks to the affluent investor and considering strategies to maintain your wealth within your family can be very beneficial.^[1] However, wealth transfer is not just for the wealthy; it’s for everyone with something to leave behind for the next generation.

Communicate Effectively

One of the most important aspects of wealth transfer is communication.^[2] While conversations about wills and arrangements for passing are not easy, they can be essential to ensure that your family understands what will happen when you are gone. If your beneficiaries understand your will and can talk to you about your will while you are alive, this can help unify your family and maintain the money that you worked so hard to give them.

It can also be helpful to have a dialogue with your family about how to manage the wealth you are going to pass down to them.^[3]  One in four adults in the US said that their parents did not provide them with money lessons when they were children, which shows how little we talk with our kids about money and how to manage it.^[4] Talking about money within the family (or even outside of it) is generally taboo in America, but it can be very important to be open with your family about your financial situation. While you may be fairly savvy about your investments and wealth management, your family members with less experience will likely need support and education explaining how best to use the money that you are passing down to them. Forces such as inflation and taxes can have a massive impact on long-term wealth, and it can be very important to educate other generations in your family about these issues.^[5]

There’s Trust in the Trust

Another excellent tool for managing your wealth after you have passed is a trust. There are many kinds of trusts, but generally, a trust is a legal vehicle that grants the power to a trustee (either a firm or an individual) to distribute and manage your wealth after you are gone.^[6] Trusts are useful because they can provide tax advantages and financial protections for your money.^[7] They are also useful because they can set up your money to be managed by an impartial and unemotional third party with the wealth’s interest in mind, not an individual family member, which can help preserve what you leave for them and for generations to come.^[8]

Another way of putting all of this: imagine that you are the captain of a ship. You wouldn’t leave the crew of your ship without any instruction or guidance on how to sail it. You would instead talk to them about how to manage a ship and explain the jobs that they need to do to keep it moving.

This conversation is the first step to understanding the full estate planning picture. If you are looking for guidance about how to manage your funds and set your family up with a long-term plan, please reach out to us for a complimentary review of your financial plan.