How long will your estate last?

If you’re worried about how long your estate will last after death, you’re not alone. According to the Williams Group wealth consultancy, 70% of wealthy families lose their wealth by the second generation, and 90% by the third. A U.S. study concluded that the rate of generational wealth attrition affects about 90% of family fortunes with taxes, bad investments, inflation, and the natural dilution of assets as they’re passed down through generations as being some of the causes.

A significant number of high-wealth individuals surveyed by U.S. Trust feel that succeeding generations are not financially responsible when it comes to handling the significant wealth that they’re going to inherit. However, 64% of respondents admitted that they’ve communicated little to nothing to their children with respect to their wealth.

Your grandkids are unlikely to see a penny

Communication seems to be the major issue in wealthy families when it comes to preparing succeeding generations on how to handle inheriting significant wealth. How long your estate will last after your death depends upon how well you prepare your children and even your grandchildren when it comes to taking on the responsibility of wealth management.

Families who have been successful in preserving their wealth are taking a more proactive role vs a reactive role in preparing the second and third generations when it comes to financial literacy. Create a “financial roadmap” for your family — what you expect when it comes to spending, saving, philanthropic efforts, and strategies for building on your existing wealth.

Equally important is sitting down with your family and discussing the provisions of your will and/or trusts. This can be very helpful in preparing the next generations for inheriting significant wealth and can also help to prevent conflict between beneficiaries after your death.

Teach your children well

While the aforementioned statistics paint a grim picture for successfully passing wealth from one generation to the next, the good news is that you can reverse this trend with communication, education, and providing good financial planning and counseling to the next generation.

Estate planning for high net-worth individuals and families involves managing wealth and protecting assets so that they can be transferred to future generations. Establishing a living trust offers several advantages if you’re concerned about preserving your wealth after your death.

With a living trust, you can set limitations on how inheritances are to be used. For example, a beneficiary may only be able to use his or her inheritance for education or health purposes. You have the ability to appoint an independent trustee who has the power to approve all asset distributions.

At California Living Trusts, we specialize in creating living trusts for high net-worth individuals and their families to protect inheritances for future generations. Schedule an appointment with one of our attorneys for wills and trusts to discuss your estate planning concerns.

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