Generational Wealth Planning: A Guide to Growing and Protecting Your Wealth For Decades to Come

About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals. 

It’s common for people to want to leave money behind for their children and family members after death. After spending years working to earn a living, people are proud to leave behind a legacy and help their future generations to be better off. But there's a common saying regarding generational wealth - "Shirtsleeves to shirtsleeves in three generations." The idea is, by the third generation of wealth being passed down, it's primarily gone. With that being said, there are things you can do now to proactively protect your wealth and your heirs. Developing a generational wealth plan, communicating with your loved ones, and working with a team of professionals can give your wealth a better chance at lasting for generations to come. 

Here’s how you can approach estate planning in a way that will last for generations, otherwise known as generational wealth planning.

Creating a Generational Plan

The making of a generational plan consists of two parts. First, the legal documents. Second, you will need a detailed plan outlined in a way that clearly states how your beneficiaries should address your wealth after your passing. There are several steps you can take now to begin the planning process.

Estate Planning

Estate planning is a critical aspect of the Financial Planning process. Establishing Estat Planning documents and reviewing them on a regular basis is an important exercise. However, this can be a daunting task for clients, who may find the exercise tedious and, perhaps, confusing.

To help guide you on Estate Planning, we have created This Checklist. It covers key considerations regarding the most common estate planning documents, including:

• Wills
• Living Trusts
• Irrevocable Trusts
• Power of Attorney
• Living Wills

Think Ahead, Far Ahead

It’s important to remember that generational wealth planning is a bit different from designating gifts for your kids and grandkids through estate planning. When you start making a generational plan, you need to be considerate of future generations, even those you’ll never meet. It may be hard, but try to think of your family as people you haven't even met you. The point of generational wealth planning is to pass your assets down to those who haven't been born yet, but it can be hard to try to consider their needs alongside the family members you already know and love.

Have Conversations With Your Family

If you want your wealth to last for generations, it’s crucial that you communicate your desires with your family. Everyone must be on the same page when it comes to leaving a legacy for future generations.

You are your family’s best resource for wisdom and guidance when it comes to this, so don’t make the mistake of thinking that your money and values need to be kept secret. Take the time to educate your children and grandchildren, sharing your vision with them so that they aren’t left feeling confused and frustrated. This is an ideal opportunity to involve your Financial Planner, as they can help you communicate your vision and answer any of the more technical questions your family may have.

Put It in Writing

Putting your plans in writing can rid future generations of potential doubt or confusion regarding your wishes. Your heirs are the ones who will truly be carrying out your generational wealth plan after you are gone.

Make sure you specifically identify how the money should be used, how it is accessed, and how it is replenished. With proper planning, it’s possible that your money could be used to invest in higher education, starting a business, or other things that will help your family grow their wealth for decades to come.

Create a Support System

Do you know what a sustainable withdrawal rate is for your assets? It's possible you may not. And if you don't know, it's highly unlikely your heirs will know either. However, understanding this and several other technical details is an important part of maintaining wealth for decades to come. This is why working with the right system of financial professionals could be your greatest chance at successful generational wealth transfer. They will have the advantage of working one-on-one with you to determine your goals, develop a plan, educate your heirs and help them stay on track.

If you think you’re ready to start creating a generational wealth plan, remember to have a clear vision and share that vision with your family members. Put these wishes into legal documents, too. Your trusted financial professional can help you begin the planning process, speak to your family members and answer any questions you may have.

Dream Financial Planning Process ™

Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. If you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.

Complimentary Consultation

With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.

Monthly Newsletter

If you're looking for guidance on your investments, you'll want to read this month's Newsletter. In my April Newsletter, I discuss Gamestop, market speculation, long-term investment returns, and 9 investing mistakes you should avoid.

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