With the largest intergenerational wealth transfer in recent history set to take place over the next few decades, legacy planning is becoming an increasingly important topic of conversation among high net worth families.
Beyond traditional estate planning, legacy planning is an opportunity to define, reflect on, and express what wealth really means to a family so that not only financial wealth, but also a family’s core values, are passed on to future generations.
Preserving and managing tangible wealth in a complex and uncertain world can undoubtedly be a challenge.
However, most often, failure to maintain wealth through the generations is due to lack of communication, education and trust among generations, rather than a poor investment strategy or a series of economic downturns.
In working with our clients, we have learned that families who are successful at transitioning wealth from generation to generation adhere to three core legacy planning principles.
Integrate planning. Legacy planning is a collaborative effort that requires open discussion not only with your wealth advisor, but also with family members and other trusted specialists.
The first step is to define your goals—that is, how you wish to enjoy your wealth and how you want it to benefit your family members and your community.
If you have philanthropic aspirations, consider the organizations and causes that are important to you and how you would like to support them.
Your legacy is as much about providing financially for future generations as it is about how you wish to be remembered.
Communicating your values and ambitions to trusted advisors and those important to you can help you develop a detailed wealth plan that aligns with your legacy goals.
Evolve a healthy family wealth culture. Creating a healthy culture—a shared set of attitudes, values, goals and behaviors that characterize you as a family—is critically important for legacy planning.
Often, the families who are most successful in developing a healthy family wealth culture preserve stories and history, articulate a common purpose and foster communication.
Families who develop a healthy attitude toward their wealth through open and honest discussion are typically more likely to see that wealth preserved from generation to generation.
Consider the elements that define your family’s culture, and keep them in mind as you designate goals for your wealth.
Develop the rising generation.
Younger generations often have difficulty distinguishing between wealth and money, and their attitude toward each can be very different.
When developing your legacy, it is important to help younger generations understand how thoughtful spending, investing and charitable giving contribute to a sense of purpose.
As you involve your children in your wealth management plans, providing age-appropriate transparency and creating a positive learning environment often put them in the best position to successfully preserve your family’s wealth and legacy.
Legacy planning is a process, a journey, a way of thinking in a long-term way about what “family wealth” really means.
For high net worth families, it can also be an important component of the overall wealth management process.
If you are just beginning, consider how these principles align with your long-term wealth goals.
Then, open up the conversation to family members and trusted advisors.
In most cases, successful planning hinges on identifying objectives, communicating them effectively, and developing a strategy that closely aligns with your goals.
