Estate Planning for Generational Wealth

By Zeke Anders on October 8, 2021

Written By: Zeke Anders

Estate planning, particularly for those with a high net worth, is more than just dividing up assets when you die. Accumulating substantial assets through entrepreneurship, a successful career, an inheritance, etc. is a tremendous accomplishment, but can come with new worries and challenges. Instead of worrying about our assets lasting through our lifetimes, we wonder about how our family and friends will react, and how our children might handle such an inheritance. Estate planning is a chance to pass on your values, to build a legacy, to build systems to support and encourage others, to do good and empower others to do good, and more.

Building generational wealth is a wonderful reward for a lifetime of hard work and sacrifice. It is natural, then, to worry about keeping that wealth intact for future generations once we’re gone. Wealth consists of more than just financial assets; it also consists of human and intellectual capital. When thinking about the legacy we want to leave, we need to think about the strengths and characteristics of our family and the values we hold. Our children and grandchildren will have different aptitudes and different goals and will adopt different standards of living for themselves. We want to give our children the resources to accomplish anything, but not necessarily enough resources to do nothing. As James E Hughes, Jr. says:

The vision underlying a system of family governance must be the enhancement of the pursuit of happiness of each individual family member as part of the enhancement of the family as a whole for the purpose of achieving the long-term preservation of the family’s wealth: its human, intellectual, and financial capital.

Just as we discovered what is “enough” for ourselves, we must think about what is “enough” for our children, above what they will earn and accomplish on their own. Additionally, treating our children equitably does not necessarily mean treating them equally. A child who wants to be an entrepreneur will have different needs than a child who wants to be a surfing instructor.  Each child will manage financial assets differently, and there may need to be different rules in place for a thrifty child versus a spendthrift child. Often during Estate Planning, we focus primarily on reducing taxes and don’t focus enough on the incentives we’re creating.

When it comes to reducing taxes, though, philanthropy is an option. Charitable giving should always come from philanthropic desire first. We will generally end up with more assets by paying taxes than by giving assets away. That said, philanthropy is another way to leave an enduring legacy and pass on our values. One way to accomplish these goals is to establish a family foundation. A family foundation allows us to make a gift today or in the future, which reduces our income taxes as well as our future estate. It also creates an organization and a structure that our family, or whoever we select for the board of directors, will manage during our lifetime and after our death. The Board must meet annually and grant 5% of the foundation’s assets to qualified charities each year. This is a great way to meet as a family and discuss values. It can be an opportunity to ask our children to find causes and get involved. There are a wide variety of qualified charities such as churches, universities, local organizations, and more. A well-managed and invested foundation could continue making gifts for decades, even generations.

Lastly, we don’t want to forget that now is a great time to begin making gifts. Having a great estate plan is important, but we won’t be around to see the results. It might be more rewarding to give to heirs and charitable causes while we are still here. Family vacations, making donations, and other pursuits can fulfill and enrich our lives. Is it better to save so our grandchildren can take two trips to Disney World in 30 years without us, instead of one trip today? There are even ways to both enjoy today while leaving more for the future such as through life insurance or charitable remainder trusts.

We hope this post sparks some ideas and conversation around estate planning. For those with a high net worth, the stakes are high, but the opportunities are tremendous. Estate planning is not just a box to be checked, but the continuation of a legacy that will last for generations.

Zeke Anders-Planning Specialist | zanders@twickenhamadvisors.com

Disclaimer

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