There’s a common saying, “shirtsleeves to shirtsleeves in three generations,” which describes the often cyclical fate of multigenerational wealth. Without proper planning and continued commitment from each generation (not just the original wealth builders), wealth preservation becomes harder and harder with each passing of the baton, and a family’s third generation often depletes wealth.
The key to successful multigenerational wealth planning is to start early, facilitate open conversations, and engage with a professional who can direct your loved ones even in your absence. For family matriarchs, being a good steward of multigenerational wealth becomes increasingly important as women face unique challenges like longer life expectancy and widowhood—both of which put them in the role of primary financial decision-maker for their families.
Let’s take a look at what goes into preserving your family’s financial legacy for many generations to come.
3 Challenges Affecting Wealth Transfer
Why, exactly, is transferring wealth from one generation to the next such a challenge?
Not only is there a level of fiscal responsibility each member must uphold, but the family dynamics and interpersonal relationships can add a level of complexity as well. Here are three challenges many families face when establishing a wealth transfer plan.
Financial Literacy
Financial education is not often taught in schools, meaning it falls to the parents, grandparents, or to the young people themselves to increase their financial literacy. But without a basic understanding of financial concepts like budgeting, saving, investing, and thinking long-term, your next generation of wealth stewards will likely not be able to manage a large inheritance responsibly.
Lack of Communication
You know what they say about making assumptions. When it comes to building a plan for the future of your wealth, never assume your children or grandchildren know exactly what you want. One of the biggest pitfalls of multigenerational planning is neglecting to communicate openly between generations.
Money may still feel like a taboo topic in your family, but it must be discussed. You want your younger generations to be good stewards of their inheritance, and they want to understand your wishes, values, and strategies for building and preserving wealth.
Set aside time to encourage your family members to ask questions, include them in meetings with your professional advisors, and start to pull back the curtain on your portfolio (even if it feels uncomfortable).
Complex Assets
Generally speaking, the larger an estate, the more complex it becomes. Your multigenerational wealth plan may involve all sorts of assets, from investment properties and trust funds to family businesses and large brokerage accounts. Your next generation of family leaders aren’t just receiving a lump sum of cash—they’re being entrusted with a variety of assets that involve different tax treatments and levels of oversight.
4 Key Components of Effective Multigenerational Wealth Planning
Now, let’s take a closer look at what goes into building an effective multigenerational plan for your family.
Tax Efficiency
The tax treatment of your assets, particularly during the wealth transfer process, can have a significant impact on the longevity of your family’s wealth.
You’ll need to work with a financial advisor and tax professional to incorporate tax-minimizing strategies. For example, you may find opportunities to reduce estate taxes (federal and state, if applicable), leverage lifetime gifting, and coordinate income tax strategies across generations.
A well-constructed wealth transfer plan will also likely include tax-advantaged investment vehicles, such as Roth accounts or trusts. By being proactive with your wealth’s current and future tax liability, you can help your loved ones preserve more family wealth and avoid the erosive effects of unchecked tax liability.
Legal Planning
Certain legal tools and documents can serve as the foundation for long-term multigenerational wealth transfer. This may include, for example, establishing certain trust structures to preserve wealth and provide control over how and when assets are distributed.
Tools such as family limited partnerships and LLCs can also be used to manage business assets and real estate holdings. Your legal strategies and planning can also extend to include some estate planning essentials, such as healthcare directives and durable powers of attorney. Once established, these documents help ensure your loved ones can act on your behalf when needed.
Charitable giving strategies, such as donor-advised funds or family foundations, can also be incorporated to reflect your values and provide benefits to both your family and the causes you care about.
Family Governance and Communication
Affluent families that are able to preserve wealth from one generation to the next often have one clear trait in common—clear family governance backed by strong inter-generational communication.
Beyond holding an occasional meeting, true family governance requires a steady structure that can be used for decision-making, resolving conflict, and ensuring a shared understanding of family goals. You may consider, for example, creating a family mission statement and forming a family council. These guardrails can help guide future decision-making while providing clarity and continuity over time.
Legacy Preservation Beyond Money
Your family’s wealth legacy goes beyond bank accounts and balance sheets. It’s just as important to pass down the values and stories that give each family member a sense of shared purpose as well.
Consider what can help you build a more meaningful and lasting legacy beyond a financial inheritance. Perhaps you’d like to start documenting in books or videos some of your family’s history or volunteer alongside your children or grandchildren on a regular basis.
If you own a family business, having a clear succession plan is also vital to ensuring continuity and protecting the business’s long-term value.
Special Considerations for Women
As the matriarch of your family, your multigenerational wealth plan should account for the unique responsibilities (and challenges) that come with a longer life expectancy. For example, consider what proactive strategies you can leverage now to cover your future financial needs (like long-term care) without diminishing your loved ones’ inheritance.
Statistically speaking, you’re likely to become a solo decision-maker later in life, which means you’ll also need to start building your support network now. Find a financial advisor you trust to guide you and your family through this wealth-generation strategy, and get your children or grandchildren acclimated to your financial landscape early on. You don’t want to leave your loved ones with surprises or questions that can’t be addressed later on.
Empowering your daughters and granddaughters with financial knowledge and independence is one of the most impactful gifts you can offer. A thoughtful, forward-focused multigenerational plan can do just that.
How WealthChoice Supports Women in Multigenerational Planning
At WealthChoice, we take a proactive, family-centric approach to wealth management that recognizes the vital role women play in shaping their family’s financial future. We work closely with our clients to create customized strategies that reflect their values, goals, and family dynamics.
Through facilitated family meetings, financial education tools, and ongoing support, we help ensure that each generation is prepared and engaged. Our process goes beyond planning for what happens when you’re gone—we focus on empowering you and your family to make confident financial decisions today.
If you’re ready to start building your family’s financial future, we invite you to begin the conversation with our team today.
