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Maintaining Generational Wealth: 3 Vital Strategies to Ensure Success

Maintaining Generational Wealth: 3 Vital Strategies to Ensure Success

| July 18, 2023

The proverb “rags to rags in three generations” means that oftentimes family wealth does not last for very long. The first generation makes the money, the second spends it, and sadly, the third ends up seeing none of the wealth.


This idea for generational wealth is not new. Cornelius Vanderbilt, one of the most referenced figures in history related to generational wealth, is quoted saying the famous last words to his family: “Keep the money together”. Unfortunately, the Vanderbilts didn’t follow their patriarch’s advice, and the family’s fortune dwindled away, but John D. Rockefeller later heeded the advice, and accordingly the Rockefellers are now in their seventh generation of wealth with billions in assets. So how did they do it?

Transferring generational wealth from one generation to the next involves passing down assets to ensure a successful future for future generations. However, many individuals unknowingly make mistakes that jeopardize their financial security and fail to consider all aspects of passing on generational wealth. In most cases, rather than sustaining their wealth beyond a few generations, families often fall victim to common mistakes that hinder the preservation of assets and the long-term success of their heirs. According to research from Cerulli Associates, approximately $84 trillion will be transferred from today's older generations to their heirs by 2045. To ensure that your family's wealth endures for generations to come, we have compiled 3 essential steps to follow:


  1. Cultivate the Right Mindset

When considering your legacy, it is essential to adopt a forward-thinking mindset. Blur the faces of your heirs and envision your wealth stretching far into the future, encompassing generations you will never meet. By adopting this perspective, you can develop strategies that focus on building a lasting financial legacy for your family, rather than letting the emotional bond between your children and grandchildren cloud your judgment.


  1. Embrace Transparency and Education

Failing to involve your family in the planning process can lead to misunderstandings and conflicts. Open communication and transparency are key when transferring generational wealth. Educate your children about financial planning, ensuring they understand the importance of managing wealth responsibly. Imparting financial knowledge and offering guidance will empower them to make informed decisions when it comes to preserving and growing the family's assets. Your children may have been raised with a good education or have grown into a successful career, but that does not mean they understand financial or generational planning. It is the giver’s responsibility to offer guidance and leadership to the family for them to know what to do when you pass away.


  1. Put Your Plan in Writing

To maintain generational wealth successfully, it is crucial to establish clear provisions on how money should be used, accessed, and replenished. Developing a comprehensive estate plan that outlines your wishes and sets guidelines for future generations is essential. Working alongside legal, financial, and tax professionals to create a tailored succession plan that addresses your family's unique circumstances. This includes securing a will and trust well in advance to prevent complications and delays in probate court.


Give a man a fish, and you feed him for a day. Teach him how to fish, and you feed him for a lifetime. Teaching children to become overly reliant on a future inheritance can hinder their personal growth, creativity, and drive. It is vital to avoid setting expectations that could derail their financial trajectory. Instead of simply passing on wealth, educate children about financial needs, goals, and money management. Train them to understand and respect the value of money so that they can continue passing on wealth to future generations.


Remember, it is never too early to start planning, and seeking the guidance of experienced professionals can help you create a robust and tailored plan that aligns with your specific needs and goals.

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"Don't Make These 5 Mistakes When Passing Down Generational Wealth to Your Family" - GoBankingRates. 

"Top 5 Mistakes in Asset Protection and Legacy Planning" - Jerry Brooks, J.D., LinkedIn.

"Top Five Mistakes to Avoid When Passing Wealth to the Next Generation" - Colorado Family Legacy.

"Your Legacy, Your Wealth, Your Choice" - Brian Skrobonja.