Your Money & Your Heirs: What’s Your Plan for Wealth Longevity?
April 17, 2024
As part of your wealth planning, have you considered your wealth’s longevity? Many of us have heard of the “shirtsleeves curse”: Family wealth is often built up and lost within three generations.
You may not be surprised to learn that recipients often make “big” purchases within the first few weeks of receiving their inheritance. This is because many heirs are not focused on the longevity of new-found wealth.
What are high-net-worth families doing to help prevent this loss? There has been an increasing focus on intergenerational wealth planning, with the objective of supporting wealth longevity. This involves getting existing generations to meet about their finances and form shared financial goals and values to help encourage lasting wealth. Here are some steps that can be taken as part of this planning process:
Start with a plan and document it Start by thinking about your vision for your wealth for the generations to come. The plan should set out goals and provisions for how you wish funds to be used, accessed and replenished. For instance, you may wish for family members to invest in themselves to gain the experience needed to create and grow wealth, using funds for higher education or a business start-up or expansion. Others may wish to leave endowments to a charity. Once you determine your goals and provisions, it is important to formally record them as this document will be passed along to future generations.
Communicate your plan Once the plan has been documented, it should be communicated to family members. Often, parents keep their finances and related values to themselves, missing the opportunity to pass along their ideals to children. While specific financial details need not be disclosed, sharing your vision is intended to be a catalyst for meaningful discussions. Some families use this plan to form a family constitution to help future generations carry forward their intentions.
Engage in regular meetings Regular family meetings are intended to help cultivate family values based on your vision for your wealth. If wealth has been carefully built up through the generations, it may involve exploring family history. Or, you may use this time to educate children about finances and managing money or introduce high-level strategies to carry out the intergenerational plan relating to running a family business or a family giving strategy.
Consider protection tools You may determine through family meetings that beneficiaries will need support. Certain tools can support beneficiaries to meet your goals, or protect future wealth in situations in which beneficiaries may not be capable. For example, a trust can put assets under the control of a responsible trustee, with the terms of the trust specifying the conditions, timing and amount of distributions to be made to heirs. Other tools, such as life insurance, can protect and grow assets while also providing access to cash. Setting up a support system of trusted professionals may help to ensure a successful wealth transfer, especially if heirs do not have the skills to manage funds independently.
Monitor the plan’s success By having an ongoing dialogue with family members, you will be able to identify and address any gaps or concerns as they arise. You can also continue to define and refine family roles to ensure that your plan has a greater chance of success.
Here to Provide Support While intergenerational wealth planning may not be for everyone, consider that creating a lasting legacy can be one of the greatest gifts you leave behind. If you need assistance with family discussions or educational tools to support children, please contact your Echelon Advisor.
What are high-net-worth families doing to help prevent this loss? There has been an increasing focus on intergenerational wealth planning, with the objective of supporting wealth longevity. This involves getting existing generations to meet about their finances and form shared financial goals and values to help encourage lasting wealth. Here are some steps that can be taken as part of this planning process:
Start with a plan and document it Start by thinking about your vision for your wealth for the generations to come. The plan should set out goals and provisions for how you wish funds to be used, accessed and replenished. For instance, you may wish for family members to invest in themselves to gain the experience needed to create and grow wealth, using funds for higher education or a business start-up or expansion. Others may wish to leave endowments to a charity. Once you determine your goals and provisions, it is important to formally record them as this document will be passed along to future generations.
Communicate your plan Once the plan has been documented, it should be communicated to family members. Often, parents keep their finances and related values to themselves, missing the opportunity to pass along their ideals to children. While specific financial details need not be disclosed, sharing your vision is intended to be a catalyst for meaningful discussions. Some families use this plan to form a family constitution to help future generations carry forward their intentions.
Engage in regular meetings Regular family meetings are intended to help cultivate family values based on your vision for your wealth. If wealth has been carefully built up through the generations, it may involve exploring family history. Or, you may use this time to educate children about finances and managing money or introduce high-level strategies to carry out the intergenerational plan relating to running a family business or a family giving strategy.
Consider protection tools You may determine through family meetings that beneficiaries will need support. Certain tools can support beneficiaries to meet your goals, or protect future wealth in situations in which beneficiaries may not be capable. For example, a trust can put assets under the control of a responsible trustee, with the terms of the trust specifying the conditions, timing and amount of distributions to be made to heirs. Other tools, such as life insurance, can protect and grow assets while also providing access to cash. Setting up a support system of trusted professionals may help to ensure a successful wealth transfer, especially if heirs do not have the skills to manage funds independently.
Monitor the plan’s success By having an ongoing dialogue with family members, you will be able to identify and address any gaps or concerns as they arise. You can also continue to define and refine family roles to ensure that your plan has a greater chance of success.
Here to Provide Support While intergenerational wealth planning may not be for everyone, consider that creating a lasting legacy can be one of the greatest gifts you leave behind. If you need assistance with family discussions or educational tools to support children, please contact your Echelon Advisor.
Disclaimers
Echelon Wealth Partners Inc.
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute the author's judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them.
Echelon Wealth Partners Inc.
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute the author's judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them.
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