Legacy Planning: Think Several Generations Ahead


Plan now to prevent your descendants from squandering your wealth after you die.

According to an ancient Chinese proverb, “Wealth does not pass three generations” — the first generation builds the wealth; the second generation is inspired to preserve it by witnessing the hard work of their parents; and the third generation, having never witnessed the work that went into the creation of this wealth, squanders it. 

We are perhaps even more pessimistic than the ancient Chinese — our experience shows that wealth is usually gone before the third generation ever sees it, unless legacy planning is undertaken to preserve wealth across generations. The law limits your ability to restrict the disposition of your wealth beyond the second generation, however, through legacy planning, you can take advantage of other means of achieving the same goals.

Family values provide a powerful incentive.

Corporations issue “mission statements” which usually include fashionable buzzwords like “leveraging” and “synergy.” A family with significant assets should do the same, with input from all of the adult members of the family. What makes you proud to be a member of your family? What makes your offspring proud? A family mission statement should be dynamic and fluid (subject to change), and it should allow every adult member of the family to contribute. 

A family mission statement should be simple enough for everyone to understand, but it should incorporate some level of detail. It should also transcend purely material considerations and be realistic. “Make enough money to buy Alaska” is probably not going to be an effective mission statement, for example. Are there any causes, such as environmentalism or medical research, that are important to family members? A family mission statement should address everyone’s concerns. 

Appropriate management of expectations can head off problems before they arise.

History bears witness to the fact that a vast family fortune amassed by one generation carries with it two distinct dangers – (i) disincentivizing subsequent generations who see no need to work (the “spoiled rich kid” syndrome) and (ii) family disharmony after the death of an elder as family members fight over the inheritance.

Regular communication can help head off these dangers, as can clear expectations that apply to every family member. Hold regular family meetings to explain the family wealth preservation and enhancement strategy, clarify goals and outline each family member’s responsibilities. 

Wealth management is a skill, and practical training makes a difference.

The preservation and enhancement of family wealth requires more than good intentions and a clear strategy. It takes practical financial management skills in areas such as tax and estate planning, insurance, trusteeship, investment advice, and foundation management. Like a recipe that is passed down from generation to generation, this knowledge needs to be passed down through regular, detailed instructions. Teach your children these skills and have them teach your grandchildren the same. This is the essence of legacy planning.

Altman & Associates will help you formulate an integrated, long-term wealth preservation plan. 

Most people realize that their true best interests transcend their lifespan. Forward-thinking people, however, possess the vision to look three and even four generations ahead of their own lifetimes. If you need assistance with wealth planning of any sort, call us today at 301-468-3220, or fill out our online contact page, to schedule a consultation.

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