For many wealthy families, it seems as though the money will never run out. Money pours in from investments and other assets. Lavish vacations, fancy cars, and designer clothes are the norm.
However, for a number of reasons, 70 percent of wealthy families are no longer wealthy by the second generation. Approximately 90 percent have lost their wealth by the third generation.
If it can happen to the Vanderbilts—it can happen to anyone. Certainly, however, there are steps that families may take to preserve their wealth.
Be Honest About Money
Many wealthy individuals prefer not to disclose their volume of wealth to their children and grandchildren. These individuals may fear that their family members will become lazy and entitled, so they instead keep their bank account statements under wraps.
However, failing to discuss money with children and grandchildren often does more harm than good. Instead of keeping wealth a secret, sharing how to make wise financial decisions will decrease the chances of wasting family money. It is also helpful to share financial and charitable goals with the younger generations. Open and honest communication is the best first step to preserving wealth.
There are numerous courses and learning materials available that families may use to teach their children and grandchildren about money.
Talk about the Estate
It is wise to get all of the children together and discuss the will as a family. Doing so allows family members to hash out any issues before a death in the family has occurred and it is too late to address them.
It is much easier—and cheaper—to change the language of a will than to fight a legal battle in probate court. Often, being open about why a will was drafted a certain way resolves many of the issues that would have come up after the estate was opened.
Today’s economy is quite different from the one baby boomers and their parents grew up in. Roughly a quarter of the baby boomer generation thinks that their children will not understand how to manage money until they are at least 40 years old. Approximately half of wealthy individuals over 70 tend to agree with this statement.
There are steps that can be taken to help younger family members, however. A financial road map is used in some families to help children and grandchildren manage their money wisely. Financial roadmaps may lay out details such as expectations on saving, spending, and charitable contributions.
Financial roadmaps may also offer guidance on increasing one’s wealth.
Speak with an Estate Planning Attorney
Texas estate planning attorneys listen carefully to their clients’ goals for the distribution of their wealth after death. These attorneys are able to help their clients craft a plan that takes these goals into account. There are a number of asset protection tools that may be used to preserve your family’s wealth.
For example, if the client is worried about a family member blowing his or her inheritance in a short amount of time, a special type of trust may be set up that only provides a certain amount of money each month to that beneficiary.
Estate planning attorneys may also help clients leave property in such a way that takes tax laws and other issues into consideration, allowing their heirs to receive as much money and property as possible.
It is never too early to speak with an estate planning attorney. As your family grows and changes, and as you accumulate more assets, you may change your estate plan as needed.
In addition to drafting a will, your estate planning attorney is able to help with the following issues:
- Creating trusts
- Drafting health care directives
- Drafting financial powers of attorney
- Creating a succession plan for your business, if you own one
These measures will ensure that the distribution of all of your property is addressed properly prior to your death, reducing the likelihood that your loved ones will end up in probate court fighting a lengthy legal battle.
At Romano & Sumner, We Create Estate Plans Tailored to Our Clients’ Needs
The Sugar Land, Texas estate planning attorneys at Romano & Sumner have experience in various estate planning and probate matters. Our firm is able to create an estate plan unique to your needs and wishes. To schedule a free consultation with our firm, call 281-640-0264 or visitour site.