3 Steps to a Lasting Financial Legacy

May 22, 2019 3 min read

You’re ready to start thinking about your legacy—what you’ll be passing on to your family and loved ones. They’ll need to be provided for and you want to make sure everything is taken care of before you’re gone. Having a good plan in place for passing your wealth on to the generations to come can give you a strong sense of peace.

It is estimated that within a generation, US $4 trillion will be passed down to inheritors in the United States, Canada and the United Kingdom. Yet wealth rarely endures long enough to create a legacy that lasts for generations. Research has shown that, historically, only 30% of wealth lasts through the second generation. And just 10% remains at the end of the third.

What can you do to help your ensure that the wealth you have accumulated over the years creates a more lasting legacy for your family? You can start by following these three steps.

Step 1: Develop a Plan

As part of your overall estate plan, you need to create a wealth-transfer strategy that meets all your goals, such as providing resources for your loved ones, donating gifts to charities, managing tax liabilities and possibly even creating a framework for preserving your family’s wealth for the second and third generations.

Of course, such a plan can be complex, involving a variety of legal documents and arrangements, such as wills, living trusts or irrevocable trusts and other advanced estate planning solutions.

Consequently, you will need to work with your financial advisor, accountant and attorney to ensure the tools you use to transfer wealth to the next generation are structured properly.

Many people think that once the planning documentation is completed they are “done” with inheritance planning. However as your life continues to change, you will want to ensure your plan keeps pace. It is recommended you review your plan when you experience:

  • Changes within family (births, marriages, divorces or deaths),
  • Changes to your estate (such as significant inheritance or gift), or
  • Changes to estate laws (either at the state or federal level).

Even if these events do not occur it is still a good idea to review your transfer plan every three to five years. This includes ensuring that executors, trustees and guardians are still appropriate.

Step 2: Communicate Your Intentions

Only 37% of those surveyed were prepared by their benefactors for receiving an inheritance. Of these inheritors, most were informed of the monetary value of the inheritance, but little else. And only 31% knew how their benefactor intended them to use their inheritance.

This lack of clear expectations from the benefactor regarding wealth transfer can have broad implications on family relationships. Differing views among family members regarding how the benefactor may have intended the inheritance to be managed can lead to family rifts, creating long-term, unintended consequences.

Such occurrences can be avoided with proper discussion in advance. If you plan on leaving sizable assets to your family, do not let it come as a surprise.

Talk with family members about how much you intend to leave them and when. For instance, tell them if it will be an outright bequest or held in trust for their benefit. And if you have plans to extend your family’s wealth through an arrangement such as an irrevocable trust, let your children or other relatives know how the trust works, your intentions regarding distributions from the trust and who the trustees will be.

Step 3: Educate Your Heirs

Also take time to help children and grandchildren develop financial literacy skills while they are young. Survey respondents said the ideal time to begin formal education on managing family wealth is starting in their late teens — ten years earlier than the average age (28) that survey respondents reported they themselves began their formal financial education.

Enjoy Greater Peace of Mind

Report findings indicate that when parents who have a wealth transfer strategy in place they feel more confident their heirs will be capable of preserving family wealth. And the earlier children are educated, the greater the likelihood they will feel confident about making sound financial decisions.

Take Action Today

You have worked hard and invested carefully for decades to build and preserve your wealth. Perhaps an inheritance also contributed to your success. Preparation, communication and education are three keys to preserving and transferring that wealth — that family legacy — for your loved ones. And for generations to come.

Contact a Farm Bureau advisor today to talk about options regarding your financial legacy, estate planning, or business succession.

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