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Five ways estate plans help build generational wealth

On Behalf of | Jan 6, 2022 | Estate Planning

It is a common misconception that only people with fantastic wealth need to create estate plans. As a result, many people choose not to plan their estates, or they procrastinate. Either way, they may lose out on one of the greatest benefits of estate planning: The ability to build generational wealth.

Generational wealth has become something of a catch phrase in recent years. This is because it addresses how people in our society do not all start on even footing. Some people find ways to build wealth and pass it on to their children. Accordingly, these children start with more advantages than those whose parents and grandparents had nothing to pass down.

The two key tools for building generational wealth

Whether or not you believe everyone has a fair shot at creating generational wealth, it’s likely you want to provide the best possible opportunities for your children. In this case, your estate plan is one of two key tools.

Obviously, you have to build up your wealth to pass it along, but then, as Business Insider notes, you want to consider two key tools:

  • An estate plan
  • Life insurance

Without getting into the details about life insurance, it’s worth noting that both these tools allow you to direct the transfer of large sums of money or assets. With the proper direction, these can transform your hard work and assets into seeds for the next generation’s business, education or investment.

The proper direction is key

When you want to use your estate plan to build generational wealth, it’s important to realize that estate plans can do more than simply direct the transfer of assets. With the right direction, Forbes notes your estate plan can do several things to preserve family wealth:

  • Avoid a contentious probate process and the associated court fees
  • Protect your assets from creditors and lawsuits
  • Minimize any impact from transfer taxes
  • Ensure that any businesses or real property remain whole
  • Educate your heirs about how to make good use of the assets you leave them

Some of these things demand that your estate plan uses more than just a simple will. Depending on your goals, you may want to use a trust, explore joint ownership or detail your business succession plan. You might also think about ways to protect your assets from any future nursing home care costs. The important thing is, whatever goals you may have, your estate plan should support your efforts.

Good estate plans provide more than peace of mind

It’s a truth and a truism that estate plans can provide peace of mind. Tools like powers of attorney and Advance Care Plans ensure that others will understand and respect your wishes even if you are unable to voice them. Your will can appoint guardians for your children and make sure your family members get the right assets. And your plan can help spare your family much of the bother of probate.

Yet, while your estate plan can do all those things, it’s important to realize that it can do more. Used wisely, your estate plan can serve as an investment in your children’s futures and a foundational part of your family’s generational wealth.