Check out our video about Passing on Your Legacy
It is estimated that 70% of the time generational wealth is lost from one generation to the next, and 90% of the time that money is gone by the third generation.*
Many of the families that we help put passing on their legacy at the top of their priority list. The harsh reality is that preserving and passing their wealth to the next generation is one of the most difficult challenges there are. In this blog we wanted to bring this issue into focus and discuss a few methods you can use to pass on the legacy that you worked so hard to create.
Issues to Be Aware of During Your Estate Planning Process
Some of the hurdles that we commonly see are as follows:
- A lack of communication, where the parents and their family don't take the time to explain their plans to pass the money to the next generation.
- A conflict among heirs, as heirs might disagree on who deserves what.
- Another hurdle is mismanagement of the funds by the heirs as they were not mentally prepared to take on the money passed down to them.
Financial literacy can be very impactful as spending habits can cause wealth to be depleted quicker than anticipated.
We do our best to communicate that generational planning is not just about creating an estate plan. It's also about preparing the next generation with the values and financial literacy they need to carry your legacy forward.
Inheritance is as much about parenting as it is about money management. Estate planning, although great when it comes to transferring wealth, does nothing to prepare the next generation for the changes in store.
Tips to Keep in Mind During Your Estate Planning Journey
It is important to clear your mind and stop thinking that talking about money is weird or uncomfortable. Be open, communicate, hold family meetings, and answer any questions that your heirs might have.
Whether you decide to formally structure these meetings or hold them loosely, talk to your heirs about the values, the hard work and effort that you put in, and the legacy that you want to leave behind when you're gone. It's important to allow them to share their feelings so they can build motivation of their own to keep the legacy going forward.
Another important step here that is often overlooked is ensuring that you introduce your heirs to the team of professionals that may have helped you build and preserve your wealth along the way. Allowing your heirs to meet your financial advisor, your accountant, or your attorney, can work wonders. Your trusted financial, tax and legal partners offer different points of view that can help communicate your legacy and values to your heirs. This could also help them along the way with their own personal growth.
The Final Word
Teach your children from a young age the importance of saving and being cognizant about spending can go a long way. The steps mentioned above are about intentional multigenerational wealth transfer, and that starts from the early age of when your children are born, not when you die. Your legacy is not just what you leave behind. Most importantly, it's what you pass forward.
We hope you found this helpful, and we’d be happy to have a conversation with you. Feel free to visit us at www.rocklinewealth.com for more insights on retirement strategies, and how we can help you reach your financial goals.
Disclosures:
* Source: https://www.nasdaq.com/articles/generational-wealth%3A-why-do-70-of-families-lose-their-wealth-in-the-2nd-generation-2018-10
Rockline Wealth Management (RWM) is a registered investment adviser located in Plainview, NY. RWM is registered with the U.S. Securities and Exchange Commission. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.
Rockline Wealth Management does not offer tax services. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses.
Past performance is not indicative of future results and every individual’s investment circumstances are different. Individuals should consult their financial professional before implementing their investment plan.