Generational wealth isn’t just for billionaires. Unlock the secrets of the uber-rich and apply them to your own legacy planning.
What is generational wealth? By wealth, we’re not talking about billions. Wealth refers to any asset - it could be the family home, sentimental items like a wedding ring, or shares in a company. What makes wealth generational is your approach to passing these assets on to your children.
By studying how families with long-standing wealth manage their estate and stay rich, we can emulate their approach. And no, it’s not some dark esoteric knowledge only available to the elite.
The Rockefeller family came from the Rhineland region in Germany. Johann P. Rockefeller landed in America in 1723 and eventually became a plantation owner. The fortune really began to accumulate when his descendant, John D. Rockefeller, founded Standard Oil Company in 1870, which later became Chevron and ExxonMobil. Today, their net worth is estimated to be around USD600 billion.
Playing a big role in preserving, and growing, the Rockefeller fortune were two family trusts, established in 1934 and 1952. These trusts managed the family’s interests in Standard Oil and other diversified investments to ensure the money would not be frittered away through frivolous spending and taxes. Today, Rockefeller Financial Services oversees all the family’s interests through various arms because their wealth had gotten too big for trusts.
A trust is an effective legal arrangement intended to ensure your assets go to specific beneficiaries. These assets can be anything at all. You have complete control over the terms of the trust because you determine who gets what, and when they get it. For example, you can specify that each of your children gets a sum of money upon reaching age 30. That was how Princess Diana ensured that her wealth was distributed solely to her children.
The privacy provided by trusts is another major reason why it is an ideal estate planning tool. Assets in living trusts don’t have to go through probate, which is public and very time-consuming. Probate proceedings can create family conflicts, undermining the purpose of creating an inheritance plan. A trust can save time, speeding up the process as all the paperwork is dealt with early on. Additionally, a trust can help reduce taxes on your assets, preventing them from eroding your wealth and imposing a financial burden on your heirs.
Click here to see our trust options and speak to your Relationship Manager about how you can tailor-make your trust.
All the wealthiest families have insurance, and it’s not just for medical coverage. With the right plan, you can build wealth and turn it into a multi-generational asset, on top of the usual benefits of insurance.
By purchasing a life insurance policy, you can leverage the payout to transfer wealth to future generations in a secure and protected manner. This approach to wealth transfer is airtight as the amount will not be accessible to creditors or subject to estate taxes, unlike assets passed down via a will.
Check out some examples of insurance plans made for legacy planning here, and discuss your options with your Relationship Manager.
While it may seem daunting, with the right mindset and strategies, generational wealth is achievable, no matter what or how much you have right now. Use these steps in combination with the two Secrets. This is the recipe for a legacy.
Beef up your financial literacy: It takes a certain level of understanding about how money works to be able to create a clear plan for building, sustaining, and transferring wealth. Read as much as you can about the various financial tools and how you can include them in your plan.
Start early: The earlier you start building generational wealth, the better. Compound interest and long-term investments can significantly increase your wealth over time. Encourage your children and grandchildren to start saving and investing early as well. Money talk should not be taboo. In fact, you can start including your kids in family budget discussions as soon as they are old enough. This will inculcate good money habits and build entrepreneurial skills. Financial management is a skillful art that can be taught, like kung fu or baking.
Create a financial plan: This is the most important step in building generational wealth. This should include a budget, savings goals, investment strategies, and estate planning. A financial plan can help you stay on track and make informed decisions about your money, and a good estate plan will ensure the fruits of your smart decisions will benefit your kids, and possibly even their kids.
Invest wisely: Investing is a key component of building generational wealth. Consider investing in stocks, mutual funds, real estate, or other assets that have the potential to grow in value over time. It's important to do your research and work with your Relationship Manager to develop an investment strategy that aligns with your goals and risk tolerance.
Focus on education: Education is one of the most valuable assets you can pass down to future generations. A good education will set your kids up for future financial stability, on their own merit, no matter what they decide to pursue.
Minimise debt: Debt can be a major obstacle to building generational wealth. Minimise your debt by paying off high-interest loans and credit card balances as soon as possible. Encourage your family members to do the same.
Create multiple streams of income: Diversifying your income streams can help you build generational wealth. You can consider starting a business or investing in rental properties to generate additional income. Your investment portfolio is also a great way to diversify income streams to supplement what you get from your job.
Develop a giving mindset: Philanthropy can be a powerful tool for building generational wealth and leaving a positive legacy. Consider setting up a family foundation or donating to causes that align with your values.
Building generational wealth requires discipline, patience, and a long-term view. By following these steps and staying committed to your financial goals, you can create a legacy of your own. If you need help getting started, reach out to your Relationship Manager to develop a plan tailored to your specific needs and goals.