4 Ways to Successfully Transfer Wealth to the Next Generation

A big part of the American Dream is to leave an inheritance – big or small – to your children and grandchildren.

You’ve done your part. You’ve worked and sacrificed to accumulate a nest egg to pass along to your family. Now the question is: are they ready for it?

Successfully transferring wealth to the next generation involves much more than a smartly designed estate plan.

Statistics suggest that seventy percent of heirs will lose their entire inheritance within a few years, often destroying family harmony in the process.

The good news is that there is a lot you can do right now to avoid the pitfalls and enjoy the original good intentions of your inheritance by planning for the conservation, growth, and transfer of wealth to your loved ones.

Consider these four tips to help ensure that your children appreciate and appropriately utilize the fruits of your labor:

1. Educate your children.

This means formally teaching them about the responsibilities associated with an inheritance and instilling a commitment to respect and preserve all aspects of your family’s legacy. This process should begin during early childhood and become more specific as they mature. However, it’s never too late. Let your loved ones know your reasons for wanting to provide this gift and your vision of what it might mean for them.

2. Never underestimate the value of asset protection!

Nasty “stuff” happens…even in the best of families. Adult children are often confronted with creditors, problematic spouses, spendthrift lifestyles, and the challenges of substance abuse. The solution? Leave a portion of your estate in a flexible, long-term trust.  This will allow your family to enjoy the benefits of their inheritance while protecting them from the aforementioned dangers.

3. Protect young heirs from themselves

The number one mistake made by most heirs is spending heavily and quickly.  Young adults need time to emotionally mature, establish their careers, develop sound financial habits, and understand the value of living below their means. Once again, a long-term trust with flexible distribution standards provides opportunity for heirs to mature before having unrestricted access to their full inheritance.

4. Teach your heirs about the value of trusted advisors.

Heirs often try to manage their own investments. They take more risk, since they didn’t earn the money. This often leads to poor investment choices, strategies that expose them to undue volatility, or unscrupulous advisors. Make sure they have a relationship with your family’s advisors (wealth manager, attorney, insurance specialist, CPA, etc.). They shouldn’t meet your advisors for the first time after you pass away.

Remember – your heirs are the stewards of your family’s legacy. Prepare them now, and you will be far more likely to enrich their lives and those of the next generation.

We're here to questions about how to establish protections or want guidance regarding talking to your children about managing money.

Contact our Wealth Management Team

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