Laurence Hale, AAMS®, CRPS®
Principal/Managing Partner, Investment Advisor & Chief Investment Officer
It’s common for people to 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. But there’s a common saying regarding generational wealth: “shirtsleeves to shirtsleeves in three generations” – meaning that by the time wealth has been passed down for three generations there’s often actually not much wealth left at all.
Unfortunately, that euphemism is rooted in truth. As I shared in an article on generational wealth myths published earlier this year, a well-known study conducted by The Williams Group found that about 70 percent of wealthy families lose their wealth by the second generation, and 90 percent lose it by the third generation.
But planning well can do a great deal to help you and your family avoid becoming part of those statistics. Developing a generational wealth plan, communicating with your loved ones, and working with a team of professionals can give your wealth a better chance of lasting for generations to come.
Here’s a step-by-step guide to getting started on creating your own generational wealth plan.
First, 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. The point of generational planning is to ensure the ability to pass assets down to those who haven’t even been born yet, but it can be hard to try to consider their needs alongside the family members you already know and love. So be careful to keep that top-of-mind as you plan and consider the best strategies for conserving your wealth over the long-term.
Second, have those important conversations with your family.
If you want your wealth to last for generations, it’s crucial that you communicate your desires to your family. This is perhaps one of the most common mistakes that people make when passing down wealth. If you’re going to make a generational plan for your wealth, make sure that plan is shared with those future generations if you want it to go smoothly.
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 talking about money and your wishes for what happens to your wealth when you’re gone is somehow taboo or tasteless. It may be difficult in some respects, that’s true – but it’s also necessary and the responsible thing to do for all involved.
So 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, explain the planning process, and answer any of the more technical questions your family may have, and even.
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Third, put it in writing.
Your heirs are the ones who will be carrying out your plan after you’re gone, and having a written roadmap on what must be done will relieve them of any potential doubt or confusion regarding your wishes. Make sure you specifically identify how the money should be used, how it will be accessed, and how it will be replenished. It may be very beneficial to work with a wealth management professional on this, as he or she can help to ensure the optimal strategies are in place to achieve long-term generational goals.
With proper planning, it’s possible the wealth you have today can be used by future generations to build more wealth tomorrow through a continued investment plan and by investing in the ability of future heirs to invest in themselves through such things as higher education or starting a business, for example.
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, 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 set of financial professionals can offer your greatest chance at a successful generational wealth transfer. They’ll work one-on-one with you to determine your goals, develop a plan, and educate your heirs. And just as important, after your passing they’ll still be there to help them stay on track.
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. Put these wishes into legal documents, too, and work with a financial professional who is a fiduciary from the start to ensure your wishes and your best interests are met.
If you’d like help with your generational wealth planning, get in touch with us at Weiss, Hale & Zahansky Strategic Wealth Advisors. We act as fiduciary wealth management advisors to help our clients build and pass along wealth to future generations through our Plan Well, Invest Well, Live Well™ process. You can request a complimentary consultation on our website or call us at (860) 928-2341.
Presented by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.