How family legacy planning can help you transfer your wealth to future generations
Estate planning is crucial to ensuring that the wealth you’ve worked hard to accumulate, grow and preserve is handed down to your family and given to nonprofit organizations doing work you value. However, once you finish your estate planning, it’s time to think about what’s sometimes referred to as “family legacy” planning.
Legacy planning can help you ensure that your family is prepared to take on the wealth you leave and use it well. Lack of communication is the primary reason that family wealth isn’t successfully transferred. Inadequate preparation is a distant second place.
If you’re married, it’s wise to be sure that you and your spouse are on the same page when it comes to the assets you’re passing down. When your children are old enough, include them in your plans. Part of this involves making sure that they’re prepared to inherit the money that will one day be theirs.
What information should you provide your children?
It’s wise to give them some approximation of what they’ll inherit and what you’d like to see them do with it. If you’re leaving one child significantly more than the others for whatever reason, it’s typically best to let everyone know this and explain your reasoning. This way, they have a chance to ask questions, and there’s less chance of them fighting about it after you’re gone.
Educating your children about how to wisely handle money is also important. If you have a financial advisor or wealth management professional, you may want to include them in some of your meetings. This can give your kids a greater sense that this is family money and you expect them to handle it responsibly.
Should you use conditional or other restrictive trusts?
You can use conditional trusts to ensure that your children or grandchildren get their inheritance only if and when they meet certain expectations, like graduating from college. You can also set up a spendthrift trust for a child whom you believe shouldn’t have direct access to their inheritance.
Only you know what’s appropriate for your family. However, if you trust your children to make the right decisions based on everything you’ve taught them, giving them clear family legacy goals along with a carefully crafted estate plan can be enough to successfully transfer your wealth to future generations.