All over the globe, there are sayings in various languages that roughly translate to “rags to rags in three generations.” What this means is that the first generation works hard and earns bundles of money, which the second generation subsequently squanders, leaving the third generation back in so-called “rags.”
That’s certainly not your intention, and your estate plan should be designed to do as much as possible to prevent that from occurring. Below are some important tips from Kiplinger about the best strategies for the preservation of generational wealth.
Having and sharing your vision
Making loads of money is great, but the reality is that money is the vehicle to get you to where you want to go in life. What will your legacy be? Will you be like the Rockefellers and invest heavily in oil refineries (to the point of the Standard Oil anti-trust suit that was filed)? Or, more like the philanthropic Carnegie family, whose name is associated with education and research foundations?
Your goals and vision don’t have to be that lofty, but they should be well-defined and shared with heirs from an early age. Transparency is always preferable to financial secrecy in families. You don’t have to share spreadsheets but give your heirs a good idea of what one day they will be expected to manage so that they can do as good a job as you have.
Diversification and trusts
We’re at a delicate point with international relations now, and it’s wise to diversify your assets so that nobody is fully dependent on one sector of the economy. Wisely diversified assets are one way to ensure that there is always another income stream flowing into your coffers.
The other matter to consider is trusts and which type, and how they will be funded, managed, accessed and disbursed. When dealing with vast sums of money, it is always best to learn more about the different ways one can preserve wealth for the generations yet to come.
