You worked hard to build up a financially strong estate. Now, as you approach estate planning, one of your goals is undoubtedly to help ensure that it continues to provide for your family. But that wealth often dries up as early as your grandchildren's generation — known proverbially as "shirtsleeves to shirtsleeves in three generations."
How can you work to avoid this huge potential loss? Here are five estate planning moves to make.
1. Use Trust Vehicles
A trust is a legal vehicle that is separate from the beneficiaries and manages one or more assets for them. Trusts can be revocable, or changeable, by the one who sets them up, or they may be irrevocable. A trust provides income for heirs but keeps the capital preserved through proper management. Trusts come in a variety of shapes and sizes to meet specific goals.
2. Foster Productive Inheritances
How can you set up your estate plans so that the money isn't just handed over to prop up future heirs without their own life goals? One way is to use it to help others develop talents, life direction, and their own wealth. This might include paying for college for future generations, helping heirs buy real estate, or passing on stakes in a family business.
3. Involve the Family
While many people want to keep their financial information private, you do well to involve the entire family in various facets of it. Understanding your goals, your efforts to earn the money, and how they can make good decisions with it will help future generations feel invested in it. And the more they feel invested in an asset, the less likely they are to waste it.
4. Focus on the Long Term
Building generational wealth means thinking beyond tax minimization or spousal transfers. It means looking at how your estate can provide future guaranteed income, which trusts meet which specific funding goals, and what future obstacles heirs might encounter.
5. Work With Pros
Planning for large estates and overcoming the challenges of multi-generational wealth is best done with the help of financial professionals. Not only can they help you understand all your wealth protection options but they can also help heirs in the future to make good decisions. Build a good team and you give your heirs the best start.
Want to know more about preserving your wealth for future family members and preventing them from becoming a statistic in just three generations? Start by meeting with a financial professional who specializes in estate planning and trust design. Make an appointment today to discuss trust and estate planning.