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Generational Wealth Planning: How To Protect and Grow Your Wealth For Decades to Come

Estate Planning, Family

Family wealth planning is about helping people address their desire to leave a legacy. While the legacy desires vary greatly between individuals, most people would like to leave something to their family upon their passing.

Some people would like to provide their children with a foundation they can build upon, one that will enable their children to achieve higher heights. Others simply want to have the ability to support their kids should they be in a place of need. While other families are more concerned about the spiritual legacy or the values that they leave behind.

"Shirtsleeves to shirtsleeves in three generations" is a saying that encapsulates the fact that generational wealth can be destroyed within two generations. The overall concept is that wealth created by the first generation usually comes from a tremendous amount of hard work and sacrifice. The children of the wealth creators see the sacrifices that their parents made, but they themselves don’t have to make the same sacrifices their parents made, because the wealth is already in place.

Generation One creates the wealth and Generation Two begins to develop more of a lifestyle existence while failing to develop the work ethic necessary to build upon the wealth created by Generation One.

More importantly, Generation Two oftentimes sow the seeds of demise because they fail to model the Generation One work ethic to their own children. They fail to train up their children in the principles of hard work, sacrifice and delayed gratification.

By the time Generation Three is in control of the assets, they are not equipped. They are missing the essential ingredients necessary to maintain and grow the family wealth. Poor spending habits, entitlement mentality and family feuds can oftentimes destroy what’s left of the family fortune. By the end of Generation Three, the generational wealth is gone.

Running with comedian Jeff Foxworthy’s “You know you’re a Redneck when….,” you know the wealth we be gone in two generations when:

  1. The wealth creator drives a 6-year-old Suburban, but his kids drive $120,000 Range Rovers and Mercedes.

  2. Generation One has one home, and Generation Two each have three homes.

  3. Generation One flies coach while Generation Three flies first class.

  4. Generation One paid their way through college, but Generation Three is upset that Grandma and Grandpa won’t pay for a BMW to take with them to the college that was already funded with the 529 Plan.

  5. Generation Two can’t figure out how to motivate their high school children to get a summer job.

Now that we’ve laid out the warning signs, there are things you can do today to proactively protect your wealth and your heirs. By developing a generational wealth plan that passes on the values that created the wealth, you can dramatically increase the probability that your wealth will last for generations to come and you can improve the chances that your grandchildren live productive and meaningful lives.

Creating a Generational Wealth Plan

A generational wealth plan is more than a set of legal documents. It’s a detailed plan outlining how your beneficiaries should address your wealth after your passing. And there are several steps you can take now to begin the planning process.

Think About Life Well Beyond Your Passing

It’s important to remember that generational wealth planning is different than designating gifts for your kids and grandkids through estate planning. When you start making a generational plan, you need to consider the future generations that you’ll never meet. The point of generational wealth planning is to pass your assets down to those who haven't been born yet, but also to pass the values on that will help your heirs be productive members of society.

Have Conversations with Your Family Today

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.

You are your family’s best resource for wisdom and guidance when it comes to this, so don’t make the mistake of keeping your money and values a secret. Take the time today to educate your children and grandchildren.

Share your most important life lessons with them. And share your vision with them. Your family should be crystal clear on what matters to you. This is also an opportunity to involve Monotelo in the process, as we can help you communicate your vision and answer any of the more technical questions your family may have.

Put It in Writing

Putting your plans in writing can rid future generations of any doubt or confusion regarding your wishes. Your heirs are the ones who will be carrying out the plan after you are gone, and they should have total clarity on what your wishes are well before you pass.

Make sure you specifically identify how the money is to be used and the stipulations on how it can be accessed. With proper planning, your money could be restricted to investing in higher education for your heirs, starting or growing a business, or other things that will help your family grow their wealth for decades to come.

Create a Support System

Understanding sustainable withdrawal rates along with a number of other technical details are an important part of maintaining wealth for decades to come. This is why working with the right team of financial professionals could be your greatest chance at successful generational wealth transfer. In working one-on-one with you to identify your goals and your values, we will be able to help you develop the plan while educating your family to help them stay on track.

In Summary

If you are ready to start creating a generational wealth plan, start the process by getting clarity on your vision and your values. Then share your vision and your values with your family members. And be sure these wishes are clearly identified in your estate planning documents. Please reach out to Monotelo Advisors if you have any questions or need help beginning the planning process.

This content is developed from sources believed to be providing accurate information, and provided by Monotelo Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult your 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.

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