How to Practice Proper Legacy and Estate Planning

Transferring wealth to your family can be a complex process, and it is important to be aware of the risks and challenges involved. A significant number of wealthy families lose their wealth by the third generation, and therefore, it is essential to know the risks that affect wealthy retirees and have strategies in place to maintain the wealth within your family.^[1] However, wealth transfer is not only relevant for the wealthy, but it is also something that everyone with something to pass down to the next generation should consider.

Communication: The Bedrock for Successful Wealth Transfer

Effective communication is crucial in the wealth transfer process.^[2] While it may be difficult to have conversations about wills and other arrangements, it is essential to ensure that your family understands what will happen to your assets when you are gone. If your beneficiaries are aware of your will and can discuss it with you while you are alive, this can help to unite your family and preserve the money that you have worked hard to provide for them.

It can also be useful to have a dialogue with your family about how to manage the wealth that you will transfer to them.^[3] A significant number of adults in the US reported that their parents did not provide them with money lessons when they were children, highlighting the need for more open and honest communication about financial matters within families.^[4]

Discussing money, even outside the family, is often taboo in America, but it is important to be transparent with your family about your financial situation. If you have experience and expertise in investments and wealth management, it is crucial to provide support and education to your family members who may not have as much knowledge in these areas. Factors such as inflation and taxes can significantly impact long-term wealth, and it is essential to educate other generations in your family about these issues.^[5]

Estate Planning and The Tool of the Trust

One tool that can be helpful in managing your wealth after you are gone is a trust. A trust is a legal vehicle that grants a trustee (either an individual or a company) the power to distribute and manage your wealth.^[6] Trusts can offer tax advantages and financial protections for your money, and they can also be used to ensure that your wealth is managed by an objective and unbiased third party rather than an individual family member.^[7] This can help to preserve what you leave for your family and future generations.^[8]

To summarize, it is essential to have a clear plan in place for transferring wealth to your family. Effective communication and the use of trusts can be valuable in managing this process and ensuring that your family is set up for long-term financial success. If you require guidance on how to manage your funds and create a long-term plan for your family, you can reach out to us for a complimentary review of your financial plan.