Generational Wealth: Creating a True Legacy

If something were to happen to you tomorrow, would your surviving family members be clear on your wishes regarding your estate? Would it even be legally clear that they were entitled to your estate? At a bare minimum, you need to create a set of estate planning documents (a will, living will, and power of attorney, plus a guardianship for minor children) that uses crystal-clear language spelling out your wishes. Be sure you update it when there is a change in your family dynamic — births, deaths, divorces, etc.

Families with significant wealth should consider multi-generational estate planning using various types of trusts to ensure the money serves multiple generations. Working with a skilled estate planning attorney, you can ask about:

• Dynasty trusts: These long-term trusts can help preserve wealth across multiple generations while minimizing estate taxes.
• Generation-skipping transfer (GST) planning: This helps reduce the tax burden when assets skip two or more generations (e.g., grandparent to grandchild).

Wealth is more than just money. It is also agency. True wealth enables you to support causes that you believe in and reinforce your values. Legally, there is only so much you can do to ensure your beneficiaries will continue to support the values and causes of your choice. That's why family meetings are so important. Regularly convene to align on values, goals, and responsibilities tied to family wealth.

Also, it's important to lead by example and create standards for succeeding generations to follow.

For example, do you wish that any of your inheritance be used for education? For charity? Setting expectations is also a good way to build self-awareness

Conversations surrounding your estate can be very different depending on a variety of factors. Probably most important is the number of children you have and their ages.

If you've achieved generational wealth while you have younger children, that requires a different conversational approach than your kids who are older, with careers and families of their own. With younger kids, you shouldn’t get too specific too soon on the details of your generational wealth. Focus instead on instilling a solid work ethic and values. It’s important that younger kids understand that the purpose of a particular career or calling isn’t just to make money — it's to make a difference. Encourage them to choose a worthy path and pursue it with integrity and commitment. Financial freedom is a rare gift. Teach your kids to use it wisely.

Simple concepts for teaching young children about money include:

• Money is earned (not just given).
• Choices have trade-offs (spend vs. save).
• Savings grow over time (delayed gratification).

The old joke about the best way to create a small fortune is to start with a large fortune is no laughing matter. Before giving your heris access to your wealth, pay close, clear-eyed attention to how they handle money. Watch for these warning signs:

• Have any of your kids “borrowed” money that they’ve never paid back?
• Have they run up a lot of high-interest credit card debt or borrowed money from others to sustain their lifestyle?
• Do they always seem to spend more than theyhave, no matter how much it is?
• Do they have a hard time distinguishing between a need and a want? (Example: Do they really need a new car every year, or do they just want one?)

When your kids are young, work to instill the idea that we earn money mainly by working for it.

Once we have money, it will last longer if we live within a budget and don't succumb to impulsive behavior. Even generational wealth has finite boundaries, and it's vital that your kids understand that. Beyond managing money, being a custodian of generational wealth and a family legacy requires many other skills and responsibilities.

At the top of the list is treating people with respect. If you have a family business, for example, you can give your kids summer internships or entry-level positions where they will have to work with (and report to) others. You can also ask your kids to make a case for supporting a cause that's important to them. You want them to fully appreciate not only the value of generational wealth but also its power to effect positive change in the world.

You can help with this process by creating a family mission or legacy statement. What are your values? What do you believe in? What do you want to support with your resources? You can also encourage contributions (e.g., through entrepreneurship, philanthropy, or service) rather than just distributions.

In the end, it’s about creating a culture of stewardship, not entitlement. That's the ultimate way to take care of your family.