Sadly for many Americans who work to build their own wealth over a lifetime, inherited wealth often has a short shelf life. In as few as three generations, some families find their wealth drying up and withering away. What can you do now to prevent this from happening to your wealth? Here are a few important moves to make.
1. Use Investing Timelines
Although investments are a big part of both wealth protection and growth, it isn't a one-size-fits-all subject. Different investments should have different timelines based on individual goals. Your retirement funds, for instance, should be invested to meet your own needs while charitable funds might be invested to boost long-term sustainability.
2. Set Up a Family Legacy
Family legacy planning serves several good purposes. First, it earmarks funds for charitable purposes and ensures that no matter what happens, your charitable legacy is continued on a broad scale. Second, because it involves other members of the family, it helps increase ownership of — and interest in maintaining — the family funds by everyone.
3. Enact Succession Planning
Succession planning is important for family businesses, but it should also be a part of wealth succession. Who will care for family wealth when you're gone? And how will they do so? What do you want to control, what should a central family manager control, and what should each party control?
4. Educate Family Members
While the primary decision about what to do with your money is your own, involving family members young and old in it can help ensure future success. Take children and grandchildren to meetings with your financial planner. Discuss your estate planning options. And educate them in financial matters like investing, debt management, and asset protection.
5. Protect Capital
The best way to avoid future generations running out of money is to protect the capital assets from which it comes. Protecting capital comes in many forms, including the use of trusts for income-producing assets, investing strategies to manage risk, and being appropriately insured. It may also mean adding assets to product future capital rather than simply growing a portfolio.
Ready to start improving your future family members from the loss of the wealth you've worked hard to procure? If so, start by meeting with a wealth management professional in your state today. With their help and your diligent attention, you can create a legacy that lasts much longer than three generations.
