The theme this week on the One Minute Retirement Tip podcast is: Why Do Family Fortunes Disappear?

Today, I’m continuing the estate planning considerations for millionaires. If the overwhelming probability is that your wealth will be gone within 3 generations, how should that influence your estate planning decisions? 

I think this is one of the most important questions that a 1st generation millionaire can ask themselves? Out of misguided sense of fairness, self-made millionaires most often transfer wealth freely and equally to their children. Children who often have very different values and views about money compared to their parents, and children who are also ill-equipped to handle the funds. 

As a result, they don’t act like stewards and don’t take the responsibility of growing and protecting the money seriously. And very frequently, inherited wealth does more harm than good, compromising initiative, character, and judgement...making heirs miserable, all while they’re pissing away your hard-earned money. 

So what’s the solution? It’s simple: Be Intentional.

Minimizing taxes is usually the biggest motivator for estate planning, but one of the most important benefits of estate planning is that it helps you be intentional with how assets are passed on to the next generation. 

Most estate planning looks something like this - even for the wealthy. Whatever is leftover after I die goes to my kids. I have a will or a trust that spells out how the money is passed along - but it’s straightforward. It’s split evenly among all children. 

The children will have a large and instant windfall with little to no communication from mom and dad about the expectations about how that money is to be handled. Children, even though they are usually in their 50s or older by this time are often unprepared. They have no idea how much there is, and certainly no idea how to handle this new wealth. So a good portion is spent up front. A new house, a new car, a vacation for the entire family. Living the good life. Often the money is not saved, invested or even earmarked for their own retirement. And what the first generation multi-millionaire family spent decades building from scratch is spent in the second generation and squandered by the 3rd generation. 

Much of this can be prevented through communication early and often about your intentions with your wealth and your expectations about how wealth is to be handled. Responsible children who view themselves as stewards are capable of using that inherited wealth for worthwhile and meaningful purposes. 

You can use estate planning as an effective tool to keep family wealth intact, and ensure that the assets and family legacy is preserved for generations. There are plenty of strategies to do this, so I recommend that you take the time to talk to a good estate attorney and think through what's really important to you regarding inherited wealth for your children and future generations.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance