If you’ve already created an estate plan to protect your spouse and children, you’re ahead of most people—many American adults don’t have an estate plan at all. However, if you’ve accumulated or built on family wealth, it’s important to think beyond just your immediate heirs. Estate planning for multigenerational families is crucial to ensure that your wealth benefits not only your children but also your grandchildren and future generations.
Why Multigenerational Estate Planning Matters
Wealth accumulated through hard work often holds deep significance for the generation that built it. They understand the challenges of financial hardship and work diligently to ensure their children have a more secure future. However, without careful planning, that wealth may not last through future generations.
By the time wealth reaches the third generation, it’s often significantly diminished or lost altogether. However, this outcome is not inevitable. Families who view themselves as stewards of their inherited wealth often take steps to preserve and grow it, educating their descendants on the importance of financial responsibility. Thoughtful estate planning can help ensure that your wealth provides opportunities and security for generations to come.
The Unique Opportunity of Multigenerational Estate Planning
If you have family wealth that you want to preserve for future generations, working with an estate planning attorney is a critical first step. It’s not necessary for you to know all the tools and strategies upfront; that’s what your attorney is there to guide you through. The key is to identify your goals, whether it’s protecting assets from reckless spending, minimizing estate tax exposure, encouraging charitable giving, or ensuring the continuity of a family business.
At this moment, you have the unique opportunity to make a lasting impact on the lives of your grandchildren and great-grandchildren. Let’s explore some estate planning tools that may help you achieve your goals.
Trusts: A Key Tool in Multigenerational Estate Planning
Trusts are powerful tools for controlling and protecting wealth, and they are especially valuable in multigenerational estate planning. Trusts keep assets out of probate, preserving privacy and allowing for the immediate management of assets by a successor trustee upon the original trustee’s death or incapacity.
Some types of trusts you might consider include:
- Discretionary Trust: This trust allows the trustee to decide when and how much to distribute to beneficiaries. Because beneficiaries are not automatically entitled to distributions, it’s harder for creditors to access trust assets. Choosing a trustee whose judgment aligns with your vision is crucial.
- Irrevocable Life Insurance Trust (ILIT): This trust helps minimize estate tax by keeping life insurance proceeds out of the insured’s taxable estate.
- Charitable Trust: Charitable lead trusts and charitable remainder trusts can support charitable causes while also providing for your family.
These are just a few examples of the many types of trusts that can be used to protect and preserve wealth across generations. Your attorney can help you determine which trusts are best suited to your family’s unique needs.
The Importance of International Considerations in Multigenerational Estate Planning
If you own international assets as a U.S. citizen, standard U.S.-based estate planning may not be sufficient. Many countries, particularly in the EU, have complex forced inheritance rules that differ from U.S. law. Additionally, some countries do not recognize trusts, which are a common estate planning tool in the U.S. To ensure your wishes and loved ones are protected, it’s essential to engage in more thorough estate planning, potentially involving estate plans in both the U.S. and the countries where your assets are located.
Additional Tools for Multigenerational Families
While trusts are essential, they are only part of a comprehensive estate plan. Powers of attorney and medical advance directives are crucial for incapacity planning. Additionally, tools like 529 plans can help save for a grandchild’s education.
Every family is different, and so are their estate planning needs. Working closely with your attorney can help you address specific concerns and create a plan that reflects your values and goals.
Begin Your Multigenerational Estate Planning Today
Protecting your wealth for future generations requires thoughtful planning and expert guidance. Contact the Law Offices of Charles L. Kurmay to start planning for your family’s future.
