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Family Dynamics: Considerations for Multi-Generational Planning

Posted by Parker Beauchamp on Apr 15, 2015

“A very rich person should leave his kids enough to do anything but not enough to do nothing.” — Warren Buffet


Having the means to pass down generational-wealth-planningwealth to your children’s children is a great accomplishment. However, it is also a great responsibility. Multi-generational estate planning brings its own set of challenges, such as:

  • Personal and emotional issues or family conflict: Complicates estate planning and can lead to emotional decision-making.
  • Transfer taxes: Inhibit efficient short-term wealth distribution.
  • Future market volatility and related unknowns: Create uncertainty in long-term forecasting and planning.

Estate Planning: 3 Questions to Ask

If you’re just beginning to explore generational planning options, start by asking these three questions.

1. How will we preserve the senior generation’s current lifestyle?

The first priority in multi-generational planning is to account for the current lifestyle and future needs of the senior generation. Calculate the assets needed to maintain their standard of living, and account for emergency spending, healthcare expenses and long-term care costs.

This process can help guide your portfolio mix. The senior generation’s income must be liquid or invested conservatively, with a strong focus on security. Any assets beyond this can be invested more aggressively, depending on the approximate timeline for distribution.

2. Would we benefit from a family office?

Once a generational wealth plan is in place, a family office could help oversee day-to-day management, removing this burden from family members.

Whether single family or multi-family, the family office effectively manages financial and personal affairs of many high net worth families. Depending on its structure, this might include:

  • Centralizing financial operations.
  • Coordinating income and estate tax planning.
  • Managing asset allocation, investments and insurance products.
  • Facilitating wealth transfer and succession planning. 

Related article: Find out if a family office is right for you.

3. Should we seek specialized consultation?

Professional wealth management consultants can help guide important multi-generational planning decisions. They can help manage different personalities, ensure assets are divided fairly among parties, and use forecasting models to project the expected lifespan of the family’s estate.

Long-term wealth management also carries its share of risks. A family member’s risky lifestyle choices could create exposures that threaten the entire family estate, or a mismanaged portfolio may not be positioned to withstand market volatility.

If clients require specialized or extensive risk management expertise, consider enlisting the help of specialized consultation. A risk management expert can collaboratively develop and execute a risk management strategy.

Choose a consultant or firm with expertise in high net worth risk management and proven experience working with family offices, business managers and high net worth families.

To learn more about the risks specific to high net worth individuals and families, download our free ebook, “Risk Management for the Rich and Famous.”

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Image Credit: dorena-wm via Flickr

Topics: Risk Management, Wealth Management