Many families want to build riches that will last for several generations. It is a difficult undertaking, though, as passing on money from one generation to the next can be fraught with difficulties.
Multigenerational wealth planning is the key to overcoming these difficulties.
Here are five strategies that can help you sustain wealth across generations:
Plan Ahead and Start Early
Planning for multigenerational wealth should begin at a young age. The earlier you begin to plan, the more time you have to accumulate and protect wealth. All family members must be included in the planning process in order to make sure that everyone is aware of the family’s goals and objectives.
Start by creating a comprehensive estate plan. This plan should outline how you want your assets to be distributed after your death. It should also include a plan for estate tax liquidity.
Prepare for Estate Tax Liquidity
If not prepared for, estate taxes can place a heavy financial burden on your heirs, forcing them to liquidate assets to cover the costs. It’s critical to make plans for estate tax liquidity to prevent this situation.
One way to do this is by purchasing life insurance. Life insurance can provide the liquidity your heirs need to pay estate taxes without having to sell assets.
Another way to plan for estate tax liquidity is by setting up an irrevocable life insurance trust (ILIT). An ILIT is a trust that owns a life insurance policy on your life. When you pass away, the death benefit is paid to the trust, which then distributes the proceeds to your heirs.
The advantage of an ILIT is that the death benefit is not subject to estate taxes, so it provides tax-free liquidity to your heirs.
Boost Your Gifting
In multigenerational wealth planning, giving gifts is a crucial tactic. You can lessen the size of your estate and your estate tax obligation by giving away assets while you’re still alive.
To reap the greatest rewards, it is necessary to give as much as you can.
Another way to maximize your gifting is by using a family limited partnership (FLP). An FLP is a partnership that holds assets, such as real estate or a business. By transferring assets to an FLP, you can give limited partnership interests to your heirs while retaining control of the assets. This allows you to transfer assets to your heirs at a discounted value, thereby boosting your gifting.
Consider Trusts
Trusts can be an essential tool in multigenerational wealth planning as it can help preserve generational wealth by providing asset protection, reducing estate taxes, and ensuring that assets are distributed according to your wishes.
One type of trust that can help preserve generational wealth is a dynasty trust. The advantage of a dynasty trust is that it allows you to transfer assets to your heirs without incurring estate taxes for several generations.
Another type of trust is a charitable lead annuity trust (CLAT). A CLAT is a trust that allows you to give assets to a charity while retaining an annuity payment for a specified number of years. At the end of the annuity period, the remaining assets in the trust pass to your heirs. This allows you to support a charity while reducing your estate tax liability and transferring assets to your heirs.
Talk to our Financial Advisors
Planning for multigenerational wealth is a difficult process that needs careful consideration of your goals and aspirations. Our team of financial advisors at Robert Emmer with Silversage can assist you in creating a comprehensive multigenerational wealth strategy that suits your goals and enables you to maintain money over generations.
To find out more about how we may assist you in reaching your wealth planning objectives, get in touch with us right away.
DISCLAIMER:
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. For version 8.1 only, please add: The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ-100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.