Family Wealth Preservation: 3 ideas to consider

Family Wealth Preservation: 3 ideas to consider

Individuals with high net worth are probably rightly concerned with preserving their family wealth, not only for their children and grandchildren but for the generations that follow them. 

But preserving family wealth is not automatic or easy. Just because one or even two generations have a comfortable level of assets and perhaps even a thriving business doesn’t mean that the next generation can preserve it. After all, the phrase “rags to riches” exists because many examples of it occur throughout history.

Working with a financial advisor to create a comprehensive financial plan is an important first step, but are there other ways families in and around the Chicago area, and elsewhere, can preserve their wealth? 

Read on for three suggestions:


1. Make an estate plan that will optimize family wealth 

An estate plan is a key component of comprehensive financial management always, but it’s even more crucial if you want to preserve family wealth.

First, you need to have a fully executed Last Will and Testament or trust in place. If you have neither or have drawn up one but it’s not legally executed when you pass away, your entire estate could languish in probate for years. If it does, legal fees and taxes could eat up part of your wealth right off the bat.


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Second, consider whether a Will or trust meets your needs. A Will sees to the dispersal of your assets after you die. You can bequeath assets to whomever you wish family member, friend, or organization (for charity purposes). 

A trust, on the other hand, sets up your assets under a trustee (or trustees) for dispersal as set forth for the trust. A trust can start bequeathing assets while you are still alive or go into effect when you pass away. You can also set up a trust to bequeath assets to your heirs at certain ages.

Third, be sure to consult with a tax professional, legal professional, as well as a professional financial advisor in the disposition of your assets. You want to optimize your taxes so both you and your heirs do not operate under a tax burden. It is possible, for instance, to gift family and friends a certain amount of money per year tax-free, and doing so can be an excellent way to minimize taxation.


2. Communicate, communicate, communicate

After setting up an estate plan, the next most important factor in preserving family wealth is communication. There are several forms of communication to consider.

First, communicate your desire that wealth is preserved. Whether you are an inheritor of wealth or made the money you want to be preserved, you need to communicate your desires to the next generation. You may want a business you started to remain in the family, for instance, or you may want to create a charitable foundation to undertake specific tasks (or want to contribute to existing charity work). Your children and grandchildren may not understand that, or its importance to you unless you communicate your wishes. 

A combination of putting your wishes and plans in writing and personal discussions are ideal vehicles for communicating this. Some people like to write a personal letter to family members expressing their wishes. These letters are not legally binding but serve as a personal link for the generations. If you run a business, it’s wise to create a written plan for business succession.

Second, communicate with your children (and grandchildren, if appropriate) to find out what they want and desire themselves. Your children’s wishes may be quite different from your own. Some children, for example, may want to work in the family business while others may not. Some children may want to be involved in any charities or other giving, and others may not – or have their own ideas about projects to work on with the family wealth.

It’s a good idea to have regular meetings about the family’s wealth. Many families have these conversations when the family simply gets together, or they establish a custom of family councils about the wealth that is quite separate from, say, family reunions. Family councils can discuss the family business, the family assets, direction, inheritance, and who would be best to run the business or assets.

Remember, too, that not everyone who wants to do a task is ideally suited to it. Be sure to evaluate your children and grandchildren for an aptitude for managing family assets or the family business. Be tactful but firm if a child’s aptitude may lay in another direction.

It’s also a very good idea to discuss education and training with the children and grandchildren. First, you need to know what they would like to be educated and trained in. Second, though, preservation of wealth takes education and training. It might be a good idea to educate them by taking them as children when you meet with financial advisors, for example. You can also set up their education in specific fields or internships at specific businesses as part of your will or trust.


3. Manage for the preservation of wealth with a financial advisor

Finally, consider managing the preservation of wealth with a CERTIFIED FINANCIAL PLANNER™️ Professional. A CERTIFIED FINANCIAL PLANNER™️ Professional can advise you on the assets in your investment and retirement plans, allocating assets such as stocks and bonds to both optimize your returns and preserve capital. They can adjust the assets as necessary, factoring in market conditions, any need for rebalancing, your age, and so on.

They can also advise you on risk management, such as life insurance (which protects your dependents in case of your demise) and insurance on all your assets (homes, vehicles, personal property, and more). A CERTIFIED FINANCIAL PLANNER™️ Professional can set up tax-advantaged plans to support the higher education of your children and grandchildren as well. 

They can help with strategies to minimize taxes not just in your estate and your heirs but for you each year by focusing on retirement funds in tax-advantaged plans and when to start required minimum distributions (RMDs) and ways to minimize those if you wish, such as by investing in Roth Individual Retirement Accounts (IRAs), which don’t require RMDs.

At Prism Planning Partners, we are CERTIFIED FINANCIAL PLANNER™️ Professionals committed to facilitating important questions so that we can help you explore all of your opportunities. If you are looking for a financial advisor in Libertyville, IL, we offer a broad array of holistic financial planning and consulting services for our clients-including retirement, investment, and estate planning.


Contact us today and let us illuminate your possibilities!

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