Preserving Family Wealth

Earlier this month, the Wall Street Journal published its first edition of a new magazine called: WSJ.Money. The magazine is a helpful resource that addresses wealth planning for families. I read some of the articles with much interest, because my practice is heavily involved in advising families regarding the transfer of wealth and the retention of wealth from one generation to the next. The new magazine included a short article regarding perpetual trusts or dynasty trusts, which I have drafted for numerous families to help preserve and control wealth after death. While the idea of a trust lasting into perpetuity is a bit difficult to grasp, the same format can be used for long-term trusts, and if the trust is drafted appropriately, it can provide each generation with flexible options regarding possible termination of the trust.

What was most interesting to me was the magazine’s focus on the inability of many wealthy families to preserve wealth from one generation to the next. Recently, I have seen two figures regarding the total wealth of American families. One figure estimates the total wealth at $64.8 trillion. Another source represented the total wealth at just over $63 trillion. Unfortunately, when this wealth transfers down from one generation to the next, the younger generation has a very difficult time preserving the wealth. Often, the wealth is wasted on lavish living and child-like pursuits or hobbies. It is my goal as a planner to help families preserve the wealth and not have it slip through the fingers of their descendants.

It is estimated that $7.6 trillion will be inherited by the Baby Boomers during their lifetimes. This is a significant amount of wealth, and many Baby Boomers will inherit wealth that is simply added to existing wealth which they generated during their lifetimes. It is critical that appropriate estate planning and financial planning be used to preserve this wealth so that it is not wasted through prodigality. The greatest means of preserving and controlling wealth is done through family instruction and the use of effectively drafted trusts. Families must have open dialogue between the older generations and the younger generations. If there are relationship problems or lack of communication, the added wealth will only increase the problems. Families need to prepare their descendants for the receipt of inheritance. Americans need to take the time now to adequately plan and inform their descendants of the transfer of this wealth. Time is of the essence, and your descendants’ livelihood may depend upon it. Leave a legacy—not a mess.