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Leaving a Lasting Legacy of Generational Wealth - Werner Law Firm

Leaving a Lasting Legacy of Generational Wealth

Troy Werner and his family

Written by Troy Werner

Troy Werner has been an indispensable asset to The Werner Law Firm since joining in 2009, providing exceptional legal service to its clients.

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POSTED ON: June 7, 2021

Most inheritance plans that revolve around preserving and growing generational wealth fail. This is partly because most estate plans do not adequately prepare the living for the intents and wishes of the dead. Time and time again, heirs and beneficiaries lament their parents’ lack of proper communication and planning and struggle to effectively manage the […]

Most inheritance plans that revolve around preserving and growing generational wealth fail. This is partly because most estate plans do not adequately prepare the living for the intents and wishes of the dead. Time and time again, heirs and beneficiaries lament their parents’ lack of proper communication and planning and struggle to effectively manage the wealth left behind for them, let alone continue to preserve it for future generations to come.

It takes forethought, planning, and plenty of communication between benefactors and beneficiaries to successfully grow and manage wealth over the course of multiple generations. At the heart of any intent to create and promote a lasting multigenerational fortune is a comprehensive and well-made estate plan.

What Makes Generational Wealth Work?

It seems most wealth is squandered by the third generation. Also known as the shirtsleeves-to-shirtsleeves curse, it seems that whenever a significant fortune is passed down to the next generation, it will have been completely diluted or spent by the third generation.

Most people who want to leave something behind for their children and grandchildren to enjoy like the idea of ensuring that they can provide greater financial security to their loved ones from beyond the grave, even providing opportunities to descendants they have never met. But there’s more to leaving a lasting legacy than intent.

Estate planning is the process of determining the distribution of wealth and assets after death. Estate planning may also encompass an individual’s own end-of-life care, as well as directives and contingencies in cases of incapacity or mental illness. But there are limitations to what most people consider to be an adequate estate plan.

For one, only a portion of Americans have an estate plan, to begin with, and far fewer have an estate plan with more than a simple last will. While the pandemic has spurred many Americans – especially younger adults – to consider their priorities and write up a will, the overall impact has been small.

Furthermore, nearly all estate plans concern themselves with the next generation's wellbeing – and not the ones after that. In other words, these plans lack generational intent. If you want to begin building multigenerational wealth, you need to create an estate plan that ensures your wealth will continue to be carefully managed for decades to come – until your heirs are ready to refine and extend that plan.

Your generational plan needs to outline how your wealth will be spent and managed in the years to come – and it should prioritize the preservation of wealth for future generations rather than the use of wealth solely as a windfall for living heirs and beneficiaries. But for such a plan (and intent) to be successful, you need more than just a written guideline.

Think (Far) Ahead

Estate plans are usually conceived to ensure that the financial wealth you have accumulated over a lifetime is properly divided and that its value is maximized and retained (i.e., by minimizing the impact of state and federal taxes after death, as well as administrative costs and fees associated with lengthy probate) as it goes from the dead to the living.

An estate plan conceived to preserve generational wealth must prioritize the longevity of the fortune, even beyond the interests of current living generations. Your immediate heirs should benefit from your financial legacy, but only insofar that it helps them continue to grow the family’s fortune effectively and, in many cases, conservatively.

This can mean that you encourage your children to manage your investments and assets after death but continue to focus on long-term growth rather than taking large distributions to fund a risky business venture. A successful generational plan sets specific limitations and restrictions, defines provisions for the usage of funds, and may even guide investment decisions beyond the grave.

Obviously, there are limits to any given person’s reasonable foresight. At a certain point, you must trust that your heirs will continue to manage and bestow the family fortune onto the next generation with the intent of continuing to preserve and grow it as best they can, given the unknown circumstances and opportunities of the future. But intent goes a long way. And so does instruction.

Communicate With Your Children

An estate plan meant to preserve and grow wealth over multiple decades after one’s death will fail if it is not previously discussed and explained. We cannot expect our children to be prophets, psychics, or mediums, and even well-educated and well-intentioned heirs may not have the financial planning skills to ensure that your bequeathment will continue to grow in a manner that you might have wanted.

If you wish for your children to continue to preserve the family legacy and grow the family’s fortune for years to come, you need to communicate that intent clearly and directly, as well as explain how you plan to ensure that your intent is executed after your death.

It takes experience not only to put wealth together but continue to hold onto it and grow it. That experience cannot be transferred upon death like the wealth itself. It needs to be taught, internalized, and sometimes even encoded into a ruleset for future generations to read and consider.

Put Your Thoughts to Paper

If you have thought about how you would want your wealth to continue to be used in the future to benefit not only your children but also your grandchildren’s children, you should take the time to distill your plan on paper and include it in the estate itself. By arming future generations with not only the fiduciary duty to care for future heirs but the knowledge to do so well, you can ensure that your family’s legacy will last much longer than the average three generations.

Work With an Experienced Estate Planning Professional

When it comes to generating, managing, and planning for long-term wealth, it helps work with a professional. Estate planning professionals can help you make the most of your life insurance policy and assets, help you reduce the impact of local and federal estate taxes on your bequeathment, and help you create trusts that may better manage your estate in the first few years after your death. An estate planning professional can also advise you on alternative means to grow an estate, whether through professional trust management, a life insurance death benefit, or simply the proper legal work to execute your legacy.

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