This information is derived from 熊猫视频鈥檚 Private Client Advisory (PCA) experience, a uniquely tax-aware approach to growing and protecting wealth through a team of specialists curated for each PCA client鈥檚 needs.听
Preserving traditions, sharing family principles,听and transferring wealth can leave a rich legacy that spans generations. Unfortunately, that鈥檚 not always the case.
Wealth Loss in Three Generations
Have you ever heard the phrase 鈥淪hirtsleeves to shirtsleeves in three generations鈥? 听The old aphorism stems from the way family wealth tends to decline rather than grow with each successive generation. (Germany uses a similar, albeit harsher, phrase: 鈥淭he first generation creates, the second inherits, and the third destroys.鈥)
Although every family is different, those that deplete their wealth in three or fewer generations usually experience one of the following issues:
- Lack of education about the value of assets, which听can lead to unintentional financial mismanagement.
- Inadequate planning and documentation, which is necessary to preserve assets, fulfill wishes, and ensure a successful transition from one generation to the next.
- Insufficient communication 鈥 it can be uncomfortable to talk about death and estate matters, especially when there is concern that beneficiaries might become lackadaisical in pursuing their own sources of income if they stand to inherit a large estate. (As we鈥檝e discussed throughout this series, communication with estate beneficiaries is critical. Get guidance on what to discuss with your children at different life stages, .)
A common result is that each next generation follows suit, creating its own wealth plan without optimizing and protecting wealth for the long-term.
Intergenerational Wealth Planning
You can prevent this pattern in your own family by formalizing a plan like we see in many private family offices. These plans can guide your family in creating a thorough intergenerational wealth strategy. Vital to protecting financial resources while honoring values and considering tax efficiency, generational wealth planning is a strategic approach to passing stable, sustainable, and significant assets to future generations.
What to Expect from Your Private Family Office Team
The ideal private family office team will integrate guidance and advice from financial planning, tax planning, legal and educational professionals to help your family navigate:
Business succession planning with a clear and concise exit strategy to leave the family business to the next generation or a with detailed plan for liquidation and to incorporate proceeds into long-term estate plan. Read more here.
Financial literacy to educate family members about financial principles, investment strategies, and the responsibilities of managing wealth, including the roles of responsible spending and saving.
Tax efficiency so that taxes don鈥檛 unnecessarily diminish wealth as it transfers from one generation to the next. Changes to complex tax legislation make it critical to seek the advice of experienced tax professionals to minimize estate and gift taxes through efficient lifetime gifting, charitable giving, tax-advantaged accounts, and other options.
Reviewing and updating estate plans as life evolves with meaningful life events, changes in tax laws, and the ups and downs of economic conditions.
Controlled asset distribution with powerful tools curated to protect assets, preserve wealth, and even facilitate philanthropic endeavors. Your team of advisors should ensure you have access to information to help you sort through the multitude of options to identify the right structure for you and your beneficiaries.
For instance, depending on your unique needs and wishes, trusts can be structured to fulfill a variety of needs, from tax efficiency to wealth preservation to providing care for special needs children and grandchildren. A donor-advised fund can allow for immediate tax-advantaged charitable giving, while a foundation is typically established to facilitate giving over a longer period of time.
Your Takeaway
Multigenerational wealth planning can be complex. It doesn鈥檛 have to be. We believe it can be an enjoyable, engaging experience when you work closely with your 熊猫视频 advisors. With decades of experience serving generations of families, we excel at the art of impartially guiding discussions (even emotional ones) and providing expert counsel directly to you and your family or alongside your other counselors, ensuring you always enjoy a no-hassle holistic approach that leverages the strengths of your entire team of experts. Talk with your advisor today or contact Cathy Shoemaker, at [email protected] or 313.202.7400.
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Investment advisory services offered through 熊猫视频 Wealth a Registered Investment Advisor. Securities offered through 熊猫视频 Financial Network LLC, member FINRA/SIPC. Insurance Services offered through 熊猫视频 Insurance Group.