There is an old quote, attributed to Andrew Carnegie, that says, “. . . shirtsleeves to shirtsleeves in three generations.” It sounds a bit cryptic today, but essentially, it means that anything you pass down will be gone within three generations. This is an American idiom, but many cultures have equivalent parables.
Commonly, when we envision the American Dream, we can see how it often ends. One generation acquires the wealth, passing it down to their children. Those children live off the money, often making no contribution to the family’s riches. By the time their children are of age, there is little of the original estate left.
People who have acquired significant assets must work to keep their legacy “third-generation proof.” In this article, we will discuss some tips and strategies for keeping your estate valuable long after you are gone.
In a standard will, you pass all your property to other people. Your will goes through probate, the process by which the court distributes this property. Afterward, the recipients receive the property, and the process is over. This works well enough for people of modest means, but when dealing with a larger estate, the assets could vanish over time.
To avoid probate, consider building a trust. A trust can dole out your fortune over time. It can determine who receives the money and property, how much each person receives, and when they will receive it. Rather than handing over all the money at once, you can build a “timer.” A certain amount of money can be granted to the recipients every five years, for instance. Trusts can include legacy plans that protect the money until it can be used by children and grandchildren, providing for future generations.
You may not wish to let a trust operate on its own. With a discretionary trust, you can appoint someone to make decisions. This person becomes the “trustee,” and it is their job to manage the trust. They can provide funds to members of the estate at their judgment. If one recipient seems to be squandering their portion, the trustee can cut them off. They could also provide assistance for this person, getting them ready and capable of living off their stipend.
If you choose to create a trust, it will be helpful to leave a message behind for the family. Some choose to do this through a letter, others may record themselves and store the footage for later. Doing this can help provide peace of mind for your family. They can hear, in your own words, exactly what your intentions are and why you’ve made the choices you have. Hearing these last wishes can also help avoid infighting, as everyone will know exactly where they stand in the estate and why.
Trusts are helpful for when you are gone, but what about when you are still here? It may be helpful for you to create a lifetime gift for your family. Think of this as a will or trust that is used while you are alive.
Like a trust, a lifetime gift will provide an allowance to members of your family. You can grant specific amounts at specific times, also like a trust. With a lifetime gift, you can monitor the spending habits of its recipients. You can use this as a teachable moment for your family. Overseeing their spending, you can help them plan better and use their money more wisely. Helping them achieve financial success now will prepare them for a more successful future.
After you’ve reviewed your options, you need to put your plan into action. Meet with your legal advisors. Working with them, create a legal document that outlines your wishes. A skilled law firm can draft a legally sound document that will withstand challenges. Follow your team’s advice. They may see ways to structure your finances that protect your assets. Bring in your tax consultant, and let them evaluate the tax consequences of your plan. They may have tools to help avoid tax hits on the estate. Finally, call your insurance professional to ensure that there is enough liquidity to make your plan work.
Talk to Your Family
Leaving a final message will mean a lot after you are gone, but you are here now. You can discuss your plans face to face. Tell them your intentions. Listen to their responses. Even if you are certain that your plan is best for them, give them the chance to voice their opinions. Talking to your family today could draw you even closer, and it can help create peace of mind for them when you are gone.