Strategies for Preserving Multigenerational Wealth

multigenerational wealth
Picture of Scott Hohman, CFP®, AIF®

Scott Hohman, CFP®, AIF®

“Riches to rags in three generations.”

If you’ve heard this old adage about multigenerational wealth, you probably know that it refers to the common phenomenon of it taking just three generations for 90% of families to lose their wealth completely. The first generation makes the money, the second spends it, and the third sees none of it. Of course, no one sets out for that to happen. Most people hope that their financial legacy will live on for generations to come. There’s a sense of meaning that comes from knowing that you’re leaving your mark on future generations, and that the wealth you’ve worked hard to accumulate your whole life wasn’t for naught.

So, where is the disconnect happening if people inherently wish to leave a lasting impact on their future family but there’s a thread of failure when it comes to creating true generational wealth? The answer lies in how one goes about defining and creating their estate plans.

What is Estate Planning?

A textbook definition of planning is something like this: the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The problem with this kind of definition, however, is that it disregards any mention of generational intent, so once the first generation passes away, the purpose of the estate plan is fulfilled once the second generation has access to the estate. Thus, multigenerational estate planning requires a broader view.

Preserving Multigenerational Wealth

When it comes to creating and sustaining multigenerational wealth, we can turn to history to see examples of what to do and what not to do. Look at Cornelius Vanderbilt whose famous last words to his family were, “Keep the money together,” but whose family chose not to follow his advice and lost their family fortune. Or we can look at the Rockefellers who did heed that advice and are now worth billions of dollars in their seventh generation of wealth.

What we can learn from these two families is that you need more than just a set of traditional estate planning documents – you need a generational strategy that maps out the future of your family’s finances in place, as well. Taken together, the estate plan holds the assets, but the written generational strategy keeps the money together. Before you sit down with your advisor to plan out a generational strategy, there are three foundational components that you need first. Once these are in place, then you can get to work on building out the framework of your generational strategy and estate plans.

#1: Think Far into The Future

Often, when people think about leaving a legacy and preserving multigenerational wealth, they’re too focused on their children and grandchildren. But to grow true generational wealth, you need to be thinking further into the future than that. If your goal is for your wealth to reach as far into the future as possible, then you need to be thinking about the generations that you’ll never be around to meet. This can be difficult to do when you’re thinking about those that are right in front of you. This doesn’t mean that you can’t have specific gifts that you give to your children and grandchildren, but that should be taken care of with your estate plans. Your generational strategy needs to take a step back and look at a much bigger picture for your family.

SEE ALSO: Put Your Kids on a Financially Responsible Path by Avoiding These Three Financial Mistakes


#2: Practice Clear Communication

We tend to think about money as something that’s personal and, therefore, not to be spoken about with other people. Yet, if you’re looking to create generational wealth, then you need to be open and honest about your plans and your assets with your family. Otherwise, you’ll miss out on opportunities to share your own knowledge and wisdom with your children and grandchildren.

As the giver, it is your responsibility to educate your family and provide guidance so that they can take up the torch once you’re gone. Do not assume that they know what you know or that they’ll learn the lessons that you’ve learned, even if they themselves are successful or well-off. Take time to provide leadership, impart money values, and teach your children about how they should manage the inheritance that they’ll be given, rather than leaving them to their own devices to figure it all out after your passing.

These conversations can be difficult to begin; after all, none of us particularly like to think about our own mortality. However, if you want your wealth to last for generations, then you’re going to have to bring your family in on your vision for the future. Not only will these conversations help better prepare your children to take over your assets, but it can inspire deep and important conversations about what you want your family to stand for and value. Additionally, this allows for you to share the wealth strategies that you’re putting into place and pave the way so that each member of your family understands what their particular role will be in preserving your legacy.

#3: Set Your Intentions

Simply telling your family what your intentions are for future generations isn’t enough because they won’t live forever either. By taking the time to put your intentions and plan for the future into writing, your wishes will be able to live on throughout future generations. As you begin writing out your plan, think about how you want your money to be used, how you want it to be accessed, and how you want it to be replenished by those who come after you.

SEE ALSO: Four Family Wealth Transfer Pitfalls to Avoid


You can think of your intentions as “laws” for future generations to follow when it comes to interacting with the family finances. It may help to focus on writing a “family constitution” of sorts that each generation will have the fiduciary responsibility to take up. The overarching goal for each generation will be to leave the family estate in better shape than it was when they received it.

Consider Coupling Your Investments with a Permanent Life Insurance Policy

Once you have the above foundational components in place, it’s time to take action. There’s a tendency to think that investments are the primary vehicle required to grow and preserve wealth, but for lasting generational wealth, you may want to enhance your estate with a permanent life insurance policy that is specially designed to meet your specific vision for your family’s future. The reason these are so important for preserving multigenerational wealth is that they offer certain features that are inherently a part of the plan and guarantee results needed for long-lasting wealth:

  • Tax-Free Death Benefit: A reason that permanent life insurance policies can enhance your estate is that the beneficiaries receive a large, tax-free lump sum at the death of the insured.
  • Access to Cash: Not only does permanent life insurance provide coverage for the rest of your life, but depending on the nature of the policy, it can also include a cash value that allows for you to tap into it while you’re still alive. Policyholders can tap into their insurance policy with a tax-free withdrawal or a loan.

It’s important that if you choose to take out a permanent life insurance policy, you and your family manage it correctly as there can be harmful and unintended consequences should the contracts be mismanaged. This is why it’s so important to talk with your children and set a precedent of teaching the next generation what they need to know and what’s expected of them when it comes to managing the family estate.

Preserve Your Wealth for Generations to Come

There’s much that goes into creating an estate plan, even more so if your intention is to create a plan that paves the way for multigenerational wealth. Not only does it require a clear vision for what you want for your family’s future, but you have to take the time to educate and empower the younger generations with the tools they need to take up your vision once you pass away. Creating and preserving generational wealth isn’t something you can do on your own, you need the entire family – for generations to come – to be on board.

At Resolute Wealth Advisor, we understand the deep desire to provide for future generations of your family and the intricacies of multigenerational wealth planning. If you’d like to start a conversation with one of our advisors about your vision for your family’s financial future, please contact us today.

The views expressed represent the opinion of Resolute Wealth Advisor, Inc. (RWA). The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While RWA believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the RWA’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.

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