Generational Wealth Planning: Growing and Protecting Wealth for Decades to Come

It’s common for people to want to leave money behind for their children and family members after death. After spending years working, many are proud to leave behind a legacy and help their future generations. But there's a common saying regarding generational wealth - "Shirtsleeves to shirtsleeves in three generations." The idea is, by the time the third generation inherits wealth, it's largely gone. There are things you can do now to proactively protect your wealth and your heirs. Developing a generational wealth plan, communicating with your loved ones, and working with a team of professionals can give your wealth a better chance at lasting for generations. 

Following are a few ideas about how the Team at Buttonwood approaches generational wealth / estate planning.

Creating a Generational Plan

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 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 your estate plan. When you start a generational plan, you’ll want to be mindful of future generations - even the ones you’ll never meet. It may be challenging, but think of your family as people who you haven't met yet. The goal is to pass your assets to those people, considering their needs alongside the family members you already know and love.

Have Conversations with Your Family

If you want your wealth to last for generations, it’s crucial to communicate your desires with your family. Everyone should be as close as possible to being on the same page when it comes to leaving a legacy for future generations.

As the CEO of your family, you are the best resource for wisdom and guidance when it comes to this, so don’t make the mistake of thinking your money and values need to be kept secret. Take the time to 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 Estate attorney and Family CFO, as they can help you communicate your vision and answer any of the more technical questions your family may have.

Engage Family in Your Philanthropy

A private family foundation or donor advised fund are powerful ways to make a difference in the world, and within your family. If giving back is important to you, instill these values in your family by keeping them involved. By introducing your family to a similar charitable mindset, you are creating a strong foundation of continual giving across generations.

Keep Younger Generations Involved

Giving back warms the heart, regardless of age. Around the age of two is when children begin to develop empathy1. Take this opportunity to engage younger generations with charities they care about. Let the children in your family research nonprofit organizations and ask them to select one or two to contribute to. Put 100% of the decision in their court – you may be surprised to find a new charity you also care about! If you enjoy helping those in need around the holidays, ask children to pick out toys to donate to Toys for Tots or a local shelter. Invite them to drop off the toys with you to show them the impact their gifts are making. Encourage giving regularly, teaching them the habit of giving.

Build Awareness & Knowledge

As younger generations reach teenage years, it’s a great time to involve them with charitable giving. Including them in meetings and listening to their thoughts can inspire and motivate them to become a larger part of your plan. Additionally, you can begin instilling a sense of responsibility and leadership qualities!

Family Meetings

Beyond birthdays and holidays, host regularly scheduled family meetings to discuss specifics of your foundation or fund and upcoming plans. Often, this opportunity is missed due to regular contact with family members in a social capacity. It’s important to set aside time to get down to business – and invite everyone involved.

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 Support System

Do you know what a sustainable withdrawal rate is for your assets? If not, 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. Therefore, 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 keep them on track.

If you think you’re ready to start creating a generational wealth plan, remember to have a clear vision and share it with your family members. Put these wishes into legal documents, too. Your estate attorney and Family CFO Team can work with you to begin the planning process, speak to your family members and answer any questions you may have. For additional thoughts and inspiration, you may enjoy The Ultimate Gift book by Jim Stovall.

1.     https://www.parents.com/toddlers-preschoolers/development/behavioral/toddler-empathy/

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.