Creating Wealth Across Generations: Select the perfect tools and clearly express your intentions! By: Stock Market Charlie

Paths to creating generational wealth

Key Takeaways

• A recent survey I just read revealed that only approximately half of the participants felt confident about having taken the appropriate steps to build and safeguard their wealth.

• Developing a strategic plan can help mitigate the effects of unforeseen events that may impact your ability to generate generational wealth.

• Effectively communicating your intentions to your loved ones is a crucial component of a successful estate plan.

Families who have diligently saved and built their wealth are often driven by an exciting secondary goal—to pass on a legacy and empower their heirs for success! According to Fidelity's latest State of Wealth Mobility study, nearly three-quarters of Americans are bursting with hope that the next generation will achieve even greater wealth than they have today.

Yet, amidst this optimism, there's a challenge—a lack of confidence in the success of wealth transfer plans. Only about half of the survey respondents feel assured they've taken the right steps to build and protect their wealth, while roughly a quarter lack confidence entirely.

Planning ahead and maintaining open communication are crucial for a triumphant wealth transfer plan. The reality is, many find these steps challenging to take.

A common myth is that wealth transfer is only for those with millions, but countless Americans have assets to pass down to their heirs.

Are you ready to kickstart your journey to creating generational wealth? These steps can help you get started on this exciting path!

1. Reflect on your legacy goals

Wealth transfer starts with a strong holistic financial plan. As an advanced planner at Black Investors Coalition, my goal is to help educate investors about estate and business planning strategies. Some investors are so concerned about running out of assets, that they can’t bring themselves to consider what might be left over after their death. You need to start with the confidence that you’ll be OK.

In initial client meetings with planners, investors should review wills and the beneficiaries listed on their accounts to ensure they reflect how they want their assets distributed. I encourage you to think through your plans for distributing complex assets, such as vacation homes or valuable or sentimental heirlooms that you might hope to keep within your family.

Also discuss family dynamics that have the potential to derail wealth transfer plans. “For example, do your children get along or are they at odds over simple issues? Is there jealousy? Can they handle the decisions necessary when they inherit assets?” Other issues I encounter regularly are questions around fairness between siblings, and the complexities of a blended family when speaking with investors.

2. Consider strategies for asset protection

The possibility of losing hard-earned wealth weighs heavily on Americans, with 4 in 10 of those surveyed worried that they could lose their wealth just as quickly as they earned it. These fears aren’t unfounded: Without proper planning, unforeseen events such as a large estate tax bill, infighting among family members, or litigation can put a family’s generational wealth-building goals at risk.

Families concerned with taxes have numerous strategies to consider that can help reduce the risk of federal estate and gift taxes. One of the simplest strategies is to gradually reduce your taxable assets by using your annual exclusion: In 2025, individuals can give away up to $19,000 (so $38,000 for a couple) each year, to as many people as they would like before it impacts their lifetime exemption. Annual exclusion gifts can make a big impact over time. Families who think they may exceed the current limits may want to explore the use of irrevocable trust solutions to help improve tax efficiency. They also can help protect assets if you or your heirs are in professions that come with a high risk of litigation.

It’s important to keep in mind that laws can change at any time. The amount you can pass to family members can fluctuate depending on who is making the laws and the state of the economy. There are also state taxes to consider—a dozen states impose some form of estate or inheritance tax, at exclusions far lower than the federal amount—as well as the potential for asset growth over time.

Trusts can also be an important tool to help you control who will receive distributions of your wealth, and on what terms. Think of trusts as a surrogate of sorts—that is, something that can follow your instructions when you’re not there anymore explains. For example, what if a child has a substance abuse issue or just can’t seem to save money? How might you ensure all your children are taken care of in the event you divorce and remarry? Certain types of trusts can address specific situations, such as protecting a child with special needs, or to ensure continuation of a philanthropic legacy.

3. Communicate your intentions

In my experience, the paperwork is the easy part, the attorneys will take care of that. It’s emotional decisions and the conversations that are hard. You’ll need to decide who will serve as executor or trustee of your estate, as well as guardian for any minor children.

While trusts can offer some measure of control, they shouldn’t be a substitute for helping your heirs understand the “why”—that is, your money values and goals for your wealth. Especially at first, you can provide as much or as little financial information as you wish. For example, you may want to share your overall plan but limit the discussion to hypothetical numbers. Or you can slowly introduce family members to your advisors, create accounts for them, and allow them to learn the financial planning process.

If your estate plan includes a trust, your trustee will need to oversee and make decisions about distributions, which can easily become complicated by changing family circumstances. A side letter of instruction, while not binding, can help your trustee prioritize and follow your intentions and values.

4. Activate and follow up on your plan

Once you’ve created a plan, make sure to follow through, by adding or updating the beneficiaries on your accounts or properly funding your trust.

It’s also critical to regularly check back in with an attorney and financial professional, especially if anything has changed in your family. New laws, birth, death, remarriage, or moving to a different state all necessitate a careful review and potential update to your plan.

Communication, trust, and using the right tools are the keys to helping lift up future generations, and give greater meaning to the assets you’ve spent a lifetime accumulating. At the end of the day, this is about honoring your family in the best way. Don’t wait to start having these conversations.

Best Regards,

Stock Market Charlie