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Most of us want to leave a legacy for our children and other family members after we die. If you have spent your working life and often many years building your investments and wealth, most of us would quite rightly feel proud to leave behind a legacy to help our children and subsequent generations. When it comes to generational wealth, we often hear the phrase, “shirtsleeves to shirtsleeves in three generations.”

The term shirtsleeves to shirtsleeves in three generations.”, is that by the third generation of wealth being passed down, it has often disappeared or certainly diminished significantly.

However, there are many options that you can implement that will proactively protect your wealth and your family who will ultimately inherit from you. It is important to develop a Generational Wealth Plan, rather than leaving it to chance. Having the right team of professionals helping you will certainly give your wealth a better chance at lasting for many generations to come. 

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It’s also a good idea, to let your family know what your plans are, well before you are gone. For your plans to succeed, your family will need to understand your wishes and the reasons behind your plans.

Here’s how you can start your Generational Wealth Planning journey in a way that will last long after you are no longer here.

Creating a Generational Wealth Plan

There are two parts to successful Generational Wealth planning. Firstly, it is essential to put the correct legal documents in place.

Second, you will need to create a detailed plan which specifies very clearly how your beneficiaries will need to deal with your wealth after you die.

How you can start this process and begin the planning.

Think about the future and what you want to happen

Generational Wealth Planning is not just about the next generation or your grandchildren. When we start the process of planning for future generations, we need to think about future generations – even the ones that have not been born just yet. It is a difficult concept to grasp, however try to think beyond your immediate family. The purpose of Generational Wealth Planning is to ensure that your assets transfer as efficiently as possible to your family and those who have not even been born yet.

Start talking to your family sooner rather than later

If it is your wish for your wealth to last for many generations, it is important that you start to have conversations about what about what you want to happen and how your wealth will transfer onto your family. It is important that everyone understands and is on the same page, otherwise you risk disagreement amongst your family, once you are no longer here. None of us would want that to happen.

As the figure head of your family, you are best placed to make the decisions about what you want to happen with your wealth, so don’t make the mistake of thinking that your money and what you want to happen should be kept secret. This is a mistake that many people make. It is better to start conversations sooner rather than later.

You should also take time to let your family know what you want to happen, sharing your vision with them so that they are not confused or disappointed once you are no longer here. This is the right time to involve your financial adviser in your plans, as they can help you formulate and communicate your ideas, as well as help answer some of the more technical questions your family may have.

Everything must be in writing

If it’s not in writing, it is far less likely to happen, and the chances of arguments increase. By putting your plans in writing you help reduce the possibility that future generations will be unsure or confused about your wishes. By putting it in writing, you will ensure that the next generation will truly be carrying forward your generational wealth plans, long after you are gone.

It is also really important to clearly specifically how you want your money to be distributed and used, otherwise a free fall all may happen. None of us would want this to happen, I am sure. With the right planning, it is possible to ensure that your money is correctly used. For example, it could be used to pay for education, to start a business or the deposit for the purchase of a house. The planning now, will help your family grow their wealth for many years into the future.

Guiding them in the future

One of the problems with inherited wealth is how to manage it. Would your children and grandchildren know what a sustainable withdrawal rate is for the money that you intend to pass to them? It’s quite possible that they will not know the answer to this question.

Understanding this, along with the practical planning, is important if you are planning the best management of your wealth for decades to come. This is why working with the right financial professionals will help you achieve successful transfer of generational wealth. Working with a financial adviser, will help you to determine your goals, create a plan, and help your family to make the most of what you pass onto them eventually.

If you are ready to start your generational wealth planning, remember that having a clear vision of what you want to happen and sharing this with your family will be very helpful. All this needs to be put into legal documents as well.

A financial professional can help you start the planning process and answer any questions you may have.

Martin Dodd is an Independent Financial Adviser providing financial planning advice in the Wolverhampton area. Midlands Investment Agency is based in Tettenhall High Street.

Contact him on 01902 742221 if you are concerned about your investments.

As with any investment, there is no guarantee that the target return will be achieved, and investors may get back less than the amount they invested. Past performance and forecasts are not reliable indicators of future performance. Tax treatment depends on individual circumstances and is subject to change.

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