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How to Pass On Generational Wealth

How to Pass On Generational Wealth

| December 31, 2023

You’ve worked hard to support your family, building the wealth required to meet their needs and allow them to live a comfortable lifestyle. Now, you have a new goal: making sure that wealth gets passed down to your children and continues to grow and provide for your family for generations.

What Is Generational Wealth?

Generational wealth, which includes all the cash, investments, businesses, stocks and bonds, and real estate you hand down to your family, is the legacy of your financial success. If you have questions about how to amass or pass on that wealth, you aren’t alone.

According to a recent article on, an estimated 70% of wealthy families lose their wealth by the second generation. That figure rises to 90% by the third generation.

That may sound discouraging, but it doesn’t have to be.

You likely had a plan when you started building your wealth — paying off debt, investing early, and developing multiple income streams. Just as you took certain steps to build your wealth, there are things you can do to ensure that the money and assets you’ve accumulated serve your family for decades to come.

It might not be easy to teach wealth-building to each generation of your family. However, three key strategies — communicating openly, formulating a solid plan, and protecting your property from taxes — can safeguard your wealth and give the next generation a chance to grow family assets far into the future.

  1. Communicate With Your Family

For many families, it’s taboo to talk about money. However, you must be willing to speak frankly to your family about your wealth if you want to pass it down to your children, grandchildren, and beyond.

Many parents, especially high-earning ones, worry about their children’s attitudes toward money, hoping to avoid raising kids who take it for granted. This often leads to parents not sharing the very knowledge their children need to continue adding to the family's wealth.

You must be open with your heirs about all aspects of your finances, both now and after your passing. They may wonder whether they can expect to receive part of your assets either as a gift or from your will upon your passing. However, what they really need to know about are your plans, values, and wishes.

Hold regular family meetings to transmit your financial wisdom, encouraging your loved ones to ask questions and allowing them to give their input into how assets are to be passed on.

  1. Make a Plan

It took a plan to build the wealth you hold, and it will take one for your family to continue to hold on to it. Your loved ones need to know what you want to pass down and how you want it done, and all those details need to be in writing.

Your estate planning should involve your entire family, as well as a financial helper who can guide the discussions, answer any questions raised, and create the legal instruments to carry out your plan.

A plan that expresses your values and wishes for your assets (and considers the input of heirs and beneficiaries) can serve as a roadmap to help those who come after you hand down your family’s worth to those who come after them.

  1. Reduce the Tax Burden on Generational Wealth

Avoiding or reducing the impact of taxes is crucial for maintaining and growing the wealth you pass along to the next generation. With that in mind, here’s a handful of estate planning tools and investments to discuss with your financial advisor:

  • Irrevocable life insurance trust (ILIT)
  • Generation-skipping trust (GST)
  • ROTH investment retirement account (IRA)
  • 529 plan
  • Family limited partnership (FLP)

The right combination of these tools will allow you to transfer your assets to your children or grandchildren while paying little to no taxes on them.

The tax-reduction methods mentioned here run the gamut from simple to confoundingly complex. As such, it’s wise to rely on a financial advisor who can help guide you as you choose the investments that will preserve your generational wealth.

The Final Step: Work With a Financial Advisor

Now that you’ve accomplished your primary financial goal — allowing your family to live comfortably — it’s time to focus on how your assets will serve your family well into the future.

To ensure that that happens, it’s a good idea to involve a qualified financial advisor in your family meetings and planning sessions. The right professional can offer much-needed advice and practical information while dispelling confusion and helping resolve disputes.

Reach out to the trusted financial advisors at Good Life Morehead City to get assistance with your estate plan. Our expertise will help ensure that future generations enjoy the same kind of prosperity that you’ve made for yourself.