Broker Check

Three Vital Steps for Protecting Multi-Generational Wealth

January 13, 2023
Share |

You’ve made the right investments and worked hard to build your wealth. You’ve had the foresight to plan, laid the foundation of financial literacy among the next generation and created multiple income streams to sustain your legacy. Now it’s time to protect your wealth, so it’s available for decades to come. 

Navigating the transition from wealth accumulation to protection is not necessarily simple and straightforward. There are steps to take today and plans to make for tomorrow. But with a little effort and the right advice, you can form—and fund—a wealth strategy that will carry on for generations. 

Alongside the careful guidance of a financial advisor, you may need to purchase insurance, restructure and reorganize your wealth to minimize your taxes and create the proper vehicles for supporting future generations. 

Just as there’s no single path to building your wealth, there are multiple methods for protecting it. Here’s where to begin.

Embrace The Next Generation

Protecting your wealth starts with a very human step: taking time to communicate with the beneficiaries of your wealth. Whether they’re family, friends or an institution, get to know them and their values, while welcoming their efforts to learn about you.

Family wealth is particularly vulnerable to a lack of trust and transparency, as friction can emerge between those establishing or protecting multi-generational wealth, and those expecting to benefit from that capital. We walk our families through a discussion about their values, and build their plan around how to bring those values to life in their financial decisions.

Building and maintaining family wealth is difficult, regardless of your background. Across almost all cultures there are variations of the theme “shirtsleeves to shirtsleeves in three generations,” which only serve to underscore the importance of strong wealth protection. Avoid the pitfalls of in-fighting, disengagement and entitlement by communicating, with clarity and grace, why you want to establish a legacy and how you will go about doing so. 

The earlier these dialogues about wealth and values can take place, the better. Communication is foundational to strong wealth protection; don’t pass up an opportunity to discuss your beliefs, knowledge, values and wishes with those who will eventually benefit from your wealth.

Purchase Life Insurance

There are many missed opportunities to use life insurance effectively to build and preserve wealth. According to a recent survey, 41% of Americans said they don’t have enough life insurance, even though the right coverage can make policyholders feel more financially secure and provide a bigger nest egg for beneficiaries. Women, in particular, are often underinsured and can significantly benefit from the right life insurance.

Life insurance can fill a number of roles in a wealth protection plan. Not only does it help inspire confidence that loved ones will be provided for, but it can also help preserve more of your assets as you pass them to heirs. 

The best financial advisors are well-versed in the strategic use of life insurance to protect wealth. If you are thinking of taking a distribution from your policy, or are interested in how life insurance can benefit you and your estate when the tax bill is due, it’s worth scheduling a meeting with a financial professional.

Establish a Trust

Family trusts are a time-tested tool for protecting and managing wealth in a manner that will benefit many generations to come. A trust allows you to set up a dedicated asset and guidelines for sharing your wealth with beneficiaries, especially for families that have complicated assets, a large estate, or challenging family dynamics.

To set up a trust that will serve and support its beneficiaries for decades and beyond, you will need to work with your financial advisor and estate attorney to decide how to manage your assets. Your trust will lay out rules for who will get access to assets, and under what conditions capital will be disbursed. 

While it might sound complicated, there’s lots of flexibility with trusts. You can use them to care for a spouse, steward assets for minor children or grandchildren, protect your wealth from creditors and even minimize estate taxes. 

With the help of a financial advisor, you can establish and fund a trust early in your investing journey. There’s no reason to wait until retirement to begin your estate planning; you can always add assets to the trust over time. You can also fund them with investments, real estate, family businesses and other assets. The most successful trusts we have seen are those where the person who funds the trust explains the intent and the spirit of the trust thoroughly to both the beneficiary and the trustee.

Protecting Your Wealth Today Makes a Difference Tomorrow 

Generational wealth is affected by many factors, including the assets you hold, your values and how you protect and share the wealth you’ve grown over a lifetime. As you and your family set out to provide for future generations, protecting those assets and making them available to your beneficiaries becomes of critical importance.

Guidance from the right advisor can maximize your protection, so assets are available to support future generations. At BFS Advisory Group, we work with clients at all stages in their wealth journey, whether they’re accumulating assets or preparing to protect and pass along a legacy. 

Our advisors complement your vision, values and foresight. We’re here to help you grow and safeguard your provision for the future—and support your loved ones as they make their way through life.