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Why is Three Generation Plan Implotant for Everyone
According to the old Chinese adage, “rags to rags in three generations,” wealth typically does not pass through families for more than three generations. Money is made by one generation, spent by another, and not passed on to the next.
This is a concern recognized by more than just the Chinese. We can say “shirtsleeves to shirtsleeves in three generations” in the United States, but the Japanese people say “rice paddies to rice paddies in three generations.”
These proverbs counter what many clients want to be done with their estates. With nearly three decades of experience, I can say that most families I’ve worked with share a strong desire to leave a lasting legacy for their loved ones through estate planning. Having one’s life’s work immortalized in the minds of future generations seems to lend significance to all that one has worked for.
If it’s human nature to want to provide for one’s offspring, why do so many families struggle to pass on their riches from generation to generation? Ultimately, it comes down to how estate planning is conceived and understood.
It is commonly agreed that estate planning is deciding what will happen to one’s property and obligations in the event of death or incapacity. The term “estate planning” is rarely used with a focus on future generations. Indeed, that is a difficult situation. With the second generation able to access the inheritance after the first dies, the estate plan will have served its objective.
Generating riches to pass down is not a novel concept. Cornelius Vanderbilt, whose final words to his family were “Keep the money together,” and John D. Rockefeller are two of the most often-cited characters in discussions of generational riches. In contrast to the Rockefellers, who are now in their seventh generation of prosperity and have amassed billions of dollars, the Vanderbilts disregarded their patriarch’s advice and saw their fortune slip away.
The Making of a Generational Plan
If you want to leave a lasting impact, you need to create a plan that gives the next-level generation the tools they need to fulfill your wishes. This written approach is an addition if you already have a will or other legal documents for your estate. Although proper legal documentation is essential for holding assets, a well-thought-out plan for passing wealth down through the generations ensures that the money stays in the family.
There are three pillars upon which you may build a discourse with your professional team of advisors about developing and implementing a generational strategy. With these nailed down, you can start laying the groundwork for what could be the most significant thing you do for your loved ones.
First: You Need the Right Mindset
It’s essential to “blur the faces” of your successors when contemplating your legacy. This is because you want to involve those in the future who will never live in your time. In this final phase of preparation, you should be thinking about your legacy in the broadest possible terms, which can be challenging if you are constantly distracted by the thoughts of your children and grandchildren.
However, this does not contain you from making bequests to surviving loved ones as part of your estate plan.
Second: You must be truthful with your family
Have an honest discussion with your loved ones about your financial situation and plans. On the whole, individuals treat their finances, morals, ideals, and hopes for the future as if they were top secret, and as a result, they miss out on passing on their wisdom to the next generation.
You can’t implement a generational plan with the mentality that everyone in the family is just as knowledgeable as you are and will pick up the ropes by watching you fumble around. No matter how well-educated or professionally successful your offspring are, that is no substitute for teaching them the importance of planning for the future.
You must provide direction and leadership for your loved ones to move forward after your death.
Many parents raise their kids in complete silence. Sometimes, heirs must wait until their parents die before they find out how to handle the inheritance they are due to receive.
Several factors could cause the condition. Some wealthy people either don’t give a damn about what happens to their money when they die, or they don’t want to have the topic. If this describes you, generational planning is probably not for you, and that’s fine. This financial resource is yours to spend as you see fit.
But for those who want to leave a lasting legacy, this is a chance to sit down as a family and discuss how you want to use your resources. Insightful conversations about your family’s beliefs, legacy, and financial plans can be sparked by thinking ahead to the passing of time and the arrival of new generations.
This may open the way for everyone to recognize their part in carrying on the family’s traditions.
Third: You must document your intentions
Legal documentation can be a guide for administering the plan, but the truth is that the estate’s heirs will be instituting the program after you are gone. So it is dangerous not only that they know and understand your intentions but that they are put down in writing so they are shareable to future generations.
To maintain generational wealth & Health, the goal should be to set exject provisions for how money is used, placing a foundation on how money is accessed and how rupees are to be replenished.
For instance, many of my clients/customers are not interested in helping their kids get out of debt or drive fancy cars. They want to see their family investing in themselves (i.e., charitable donations that support the family values, a higher education, and business startup or expansion) while growing the assets in the plan.
Mostly successful people will tell you that experiencing what it took to create wealth also helps them keep and grow the wealth. What it takes to build wealth is not shareable to those who have never made wealth for themselves. So, the idea is to disocunts your heirs the means to get a higher education, earn more money, or start a business to generate wealth for themselves and experience what it takes to create wealth and keep it.
Always Put your strategy in writing, perhaps as a part of an heirloom family constitution or bylaws. Every generation has a fiduciary duty to carry out the wishes of the one before it, with the sole aim of leaving the estate in a better condition than when it was given to it for the benefit of the following generation.
How to Maintain the Asset Growth of Your Estate for Generations
It’s common to think of investments as the engine behind ambitious aspirations to improve one’s financial situation. In contrast, in my opinion, a professionally managed whole life insurance policy is the key driver for building and protecting assets while also providing access to cash in a multi-generational plan.
Generational planning benefits from these contract structures due to their ability to mitigate unfavorable consequences. The inherent qualities of such contracts guarantee the results (if structured properly), allowing for the provision of a generational plan with predictable outcomes throughout time.