Family Wealth Preservation Strategies – The Why, What, and How?
The following six best practices help protect family wealth. The top six practices are as follows:
- Understand the family’s objectives.
- Identify potential threats to the estate plan’s effectiveness and implement safeguards needed by creating a trust or partnership, appointing an executor and a trustee,
- establishing safe deposit boxes, transferring assets into trusts, incorporating your business entity in a way that protects minority interests for later generations
- Gather information about your estate plan. Your attorney will be able to help you get a full grasp of what is needed to execute the strategy and make all necessary changes as your financial circumstances change.
- Work with your attorney to create an organized estate plan that includes “living wills” and other advance directives, powers of attorney, beneficiary designations, trust agreements, wills, and trusts
- Know your heirs’ desires about their inheritance before creating the will. Think about how you want people to remember you in future generations. Choose a legacy you can be proud of, such as philanthropy.
It takes work to talk about money.
For many people, it’s even harder to talk about family wealth. There are so many emotions wrapped up around money — fear, anxiety, anger, and guilt — that talking with your family about how they’ll share the wealth can be downright painful.
But if you don’t have a plan before you lose one or more of your parents, you’ll likely be left to make critical decisions at the moment. And that could mean losing out on an opportunity to do things differently than your parents did.
That’s why it’s so important for families to start planning for what happens when one or more of them loses capacity — whether due to old age or illness — before it happens.
Why is Family Wealth Preservation an Important Strategy?
We are exploring the importance of family wealth preservation and how we can achieve it.
Family wealth preservation is an essential strategy that every family should adopt. It is important because it protects assets and provides peace of mind for future generations. There are various ways to preserve wealth in a family below.
The first reason preserving wealth is so important is because many potential threats are looming over our heads currently that could affect our investments and savings in the future, such as inflation, market crashes, and other economic factors. The increased risk means it’s more important than ever to have a plan to protect your assets, so they’re not at risk of being destroyed by these external factors.
The second reason is that it’s the smart thing to do. If you want to ensure your savings are secure, then it’s necessary to start a plan for how you’ll preserve wealth and build up your investments so they can provide for you in the future and prepare you for potential future threats.
Finally, life insurance is critical. When an individual dies, multiple processes must be completed for their estate and loved ones to receive the money they’ve saved. These steps include taxes, probate, legal fees, and other costs that can be very high during this process. Life insurance is a way for families to protect themselves from these expenses since their assets are passed on to their loved ones in case of death.
How to Put a Plan in Place for Your Family’s Assets with 5 Key Steps
1. Establish the goals and objectives of the plan.
2. Identify the beneficiaries.
3. Determine the type of assets to be included in the plan.
4. Decide on a trustee and executor for the plan.
5. Determine how to distribute any proceeds received from an estate or trust.
The Importance of Having a Plan in Place so You Spend More Time Enjoying Your Finances and Less Time Managing Them
A financial plan is a map to help you reach your goals. It brings clarity and direction to your money so you can spend more time enjoying it and managing it less. Every month you should ask yourself the following questions: –
– What are my current financial goals?
– How am I doing this month toward those goals?
– What did I learn from this month?
The next question is, how can I improve my financial plan for next month?
Wealth Coaches, experts, and friends all have the experiences that helped them succeed, so talking to them about your goals will help you develop a plan.
A financial plan isn’t just about what you should do with your finances; it’s also about the values that guide your choices. Sometimes those values are not aligned with each other, or they contradict one another. If money is central to your life and you don’t love what you do for a living, you need to find a new career.
The Family Business Legacy
If you’re part of a family business, you know the importance of succession planning. It’s not always easy to decide what to do with your company when the time comes to hand it off.
But there are ways to make sure your legacy is preserved for generations to come — and that your family
members don’t lose out on their inheritance. Here are some strategies for handing over your wealth:
- Planned giving: There are many ways to use planned giving as part of your wealth transfer plan. You could donate the stock directly to a charity or charitable trust, which can be an effective way for donors to reduce their capital gains tax liability.
- You could also set up a charitable gift annuity or fund a donor-advised fund at a community foundation so that you can recommend grants from the funds as they grow each year and still have access to the money yourself later on if needed.
- Life insurance: Life insurance can be used as collateral for loans and lines of credit, so it’s important that you have adequate coverage in place before transferring assets into trust accounts, where they’ll be used as security for loans.
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