Discover 3 Family Wealth Planning Secrets

A happy multi-generational family enjoying a day out in the park now that they know the secret to family wealth planning

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Have you ever heard of the hit 2019 film Knives Out? It’s a murder mystery about multimillionaire writer Harlan Thrombey’s suspicious death on the eve of his 85th birthday. The suspects: Harlan’s children, their spouses and even his grandchildren, who stood to inherit huge sums (or not!) from his estate. It’s a classic Agatha Christie-esque whodunnit reimagined for a modern audience… and it’s a great intro to our topic for today: family wealth planning.

For high net worth families, family wealth planning can be a complex and daunting process… even without the impending threat of death. And as the film brilliantly illustrates, there’s a right and a wrong way to go about it: one leads to chaos, rivalry and deception, and the other to transparency, generosity and truth.

Perhaps we’ll cover the former option in another blog post, or perhaps you could just watch the film to see that cautionary tale portrayed onscreen. Today, however, we’re going to talk you through three great ways you can use family wealth planning to preserve, grow and share your wealth across generations and communities (1) clearly, (2) kindly and (3) relationally.

Spoiler alert: without this kind of positive, open and intentional approach, family wealth can easily go to waste, resulting in a sad ending for almost everyone involved. With the three family wealth planning secrets we’re going to discuss here, however, we believe you can build a robust financial legacy for generations to come.

The Power of Clarity in Generational Planning

Beautiful diamond ring displayed in its box, as a visual metaphor for clarity, a secret power when it comes to family wealth planning
Family Wealth Planning and the Gift of Clarity

Building a Financial Legacy That Lasts

Generational planning is not just about ensuring that your children are well taken care of; it’s about creating a holistic legacy that endures to your grandchildren’s generation and beyond. This type of planning requires a long-term vision and strategies designed to withstand inevitable economic fluctuations and changing family dynamics.

Once you have those in place, it’s imperative that you find ways to share them with the relevant family members, and to invite feedback and dialogue. This is exactly the kind of thing our president, Greg Liszka, likes to invite Iron Point clients to do:

“If our clients are willing, at some point I have found that it is healthy for them to bring the next generation in. To what degree they want them to know everything, well, that’s up to them…

…but just having that introduction to the next generation, opening the door on what we’ve been able to accomplish for their parents — that helps preserve and consolidate the assets. Then, if the next generation is willing, we can start a relationship with them too.”

Without this kind of introduction, it would be easy for the next generation to take their inheritance and use it mindlessly; with it, they can see a big-picture perspective of long-term success, and decide what they want to do from a different, intentional starting point.

Gaining this perspective can also open the door to all sorts of conversations — about values, about philanthropy, about stewardship of resources — all because of the transparency involved. When you understand why something is the way it is — in this case, the older generation’s finances — you can make meaningful choices to continue in the same direction, or even co-create a new one together.

Educating the Next Generation(s)

Family wealth planning doesn’t have to stop at the second generation, either. Another key part of the process is about educating the youngest generations in your family about financial responsibilities, investment ethics and wealth strategies.

For instance, many families piggyback off significant shared moments like holidays or birthdays to plan family meetings, or to form a “family council” in which they can discuss financial matters openly. Where children are invited to these meetings, this can not only prepare direct heirs for their future responsibilities, but can foster a sense of unity and shared purpose throughout all generations in a family line.

This kind of space could even be used to flesh out disagreements: to work through struggles and challenges together, safely and respectfully (possibly with the help of a trained, neutral mediator). Instead of avoiding potential arguments around inheritance, you can use it as an opportunity to fight for togetherness (unlike the family in the aforementioned movie).

Setting Long-term Goals

In terms of a schedule for these kinds of meetings, we recommend including time to set long-term financial goals that align with your family’s values and aspirations. Whether that looks like investing in sustainable, environmentally-friendly technology, supporting educational initiatives, or anything else, having clear objectives can guide your investments and expenditures, and ensure that your wealth continues to serve a meaningful purpose.

If appropriate, you could use those long-term goals as a springboard into specific action steps, like establishing a family trust. Trusts can be tailored to meet your family’s specific needs, whether that’s providing for education, for healthcare, or for any other important part of your family’s shared life — all while safeguarding the principal contents of the trust.

Trusts can even be used to help instil financial discipline in the generations to come, through clauses that require funds to be distributed pending specific conditions being met — for example, a family member reaching a certain age or level of educational attainment.

Non-Traditional Family Wealth Planning

Trusts don’t just have to serve traditional family structures, either: “family wealth planning” looks very different from one group of people to the next. If you don’t have children, for example, that doesn’t need to stop you from going through the same kind of process, as Greg explains with reference to a recent client example:

“I helped a client who had no children, who has done very well, and whose passion is for mules. They love mules. They have a little farm with several mules, and when they pass, we’ve set up a foundation to care for mules, so we’ll be giving out $50,000 a year to different mule rescues around the country.”

As the popular aphorism goes, “The earth is our home.” Pair that with another saying — “Home is where the heart is…” — and you can see that the same principles remain no matter who you are or what your situation is. It’s the clarity around purpose and application that remains key.

Tax-Efficient Wealth Transfer (Putting Relationships First)

People exchanging an apple as a visual metaphor for the importance of relationality in family wealth planning
Putting Relationships First in Family Wealth Planning

Understanding Tax Implications

Not to be too macabre, but Benjamin Franklin’s famous quote, “In this world, nothing is certain except death and taxes,” rings especially true in the context of family wealth planning — and it leads us to our second secret to success: putting relationships first by proactively tax planning.

Transferring wealth inter-generationally inevitably means navigating complicated tax landscapes. Without proper planning, a significant portion of your estate could be lost to taxes — taxes that could be a massive headache for the next generation (not exactly the parting gift most people want to give).

Take, for example, the simple topic of beneficiaries. This is something that comes up and time and again for Greg’s clients:

“One of the problems I hear a lot is that people don’t update their beneficiaries often enough. Say they had a big life event — maybe they got married — and they didn’t update things so that their new spouse became their beneficiary… instead, it’s still their mother!

Or, even worse, say they got divorced and their ex is still their beneficiary. I’m assuming you got divorced not because you were madly in love! So there could be some hard feelings about that, especially if you later remarry. I’ve seen that happen, just because our client has never checked, or they’ve never had somebody ask the question.

It’s a rudimentary, basic thing that has real life consequences. If you have no beneficiaries in the State of Pennsylvania, then your spouse will only be a 50% beneficiary; the other 50% automatically goes to your children — this is designed to maximize the amount of taxes you pay. You can pass assets to your spouse with no inheritance, but for children, it’s a 4.5% tax.

Perhaps the best ways to avoid this kind of nightmare scenario, and to bless the next generation without unwanted tax bills, are to a) keep your beneficiaries updated (e.g. you could run through a checklist to deal with this during your ‘family council’) and b) use trusts as a tool for tax-efficient wealth transfer.

We talked a bit about this latter point in the previous section, but it bears repeating: trusts can help minimize estate taxes and provide a visible, structured way to distribute assets over time. Irrevocable trusts, for instance, remove assets from your taxable estate, and provide for significant tax savings, ensuring that your assets serve the relationships you care most about.

Maximizing Gift Tax Exemptions

Another very relational strategy is to take advantage of annual gift tax exemptions and your overall lifetime gift exemption long before it comes time to administer your estate. In 2024, you can gift up to $18,000 per year per recipient without incurring gift taxes, while the current lifetime gift exemption is $13.61 million. Taking advantage of these over time, for the direct benefit of those you love, can substantially reduce the size of your taxable estate.

If you are interested in finding out more about ways to take advantage of your lifetime gift exemption, why not check out this free resource on SLAT trusts?

Charitable Contributions for Tax Benefits

Incorporating charitable contributions into your family wealth planning — again, keeping a relational perspective front-and-center — can also provide substantial tax benefits. Donor-Advised Funds (DAFs), for instance, allow you to make charitable donations and receive an immediate tax deduction while retaining the ability to distribute funds over time.

Outside of DAFs, there are other ways to navigate around taxes for charitable purposes. Take, for instance, IRAs. Here are some of Greg’s real-world insights:

“I just gave an entire presentation to a church in Greenville, OH, about charitable donations out of their IRAs. There are a lot of people who, while they are of an age where they are forced to take distributions from their IRA, don’t need the money… but they’ve got to pay tax on those distributions.

So if they were going to donate that money anyway, then why not do it directly from the IRA, where there are no taxes? Easy math: let’s say they were forced to take $10,000 and they’re in the 25% tax bracket; well, if they were going to give away that money to the church, there would be $7,500 left over if they funnelled it through their checking account. But if they did it directly from the IRA, they could give the full $10,000, tax-free.”

When you engage in family wealth planning through the lens of our second secret, relationality, you set an example for the generations to follow. When people see you putting others first, and being considerate towards their needs (whether tax-related or otherwise), you can inspire them to live differently in the world, and to take up your mantle. That’s the power of putting relationships first.

The Importance of Kindness in Family Wealth Planning

Boy holding onto pink kindness flag on the beach
The Importance of Kindness in Family Wealth Planning

Benefits Beyond Taxes

Our third and final secret to family wealth planning intersects with, but also goes further than, the charitable giving we discussed above. Philanthropy is more than just a tool to be used for tax benefits; it can also play a pivotal role in uniting your family and instilling shared values — for instance, the value of kindness.

Creating a family foundation or contributing to causes that matter to you can provide a sense of purpose and connection among family members. To quote the late, famous South African Anglican bishop, Desmond Tutu, who helped lead his nation peacefully out of apartheid, “Do your little bit of good where you are; it’s those little bits of good put together that overwhelm the world.”

Creating a Lasting Impact

With those words in mind, it goes without saying that including philanthropic goals in your wealth plan can leave a lasting impact on society. Whether that means supporting education, healthcare, or environmental sustainability, philanthropic endeavors can be a powerful way to give back while nurturing a sense of gratitude and responsibility in the hearts of the next generation.

Active Family Involvement

Involving family members in philanthropic decisions can also strengthen bonds and create a sense of unity. And if you want to take that kind of “generational transfer” up a level, finding avenues to participate in hands-on charitable opportunities together can leave an even greater impression on those you love.

When you humbly “put your money where your mouth is”, and you actively invite others in your family to join you, you can co-create an intangible, unforgettable monument to kindness in your generational line. In some cases, it might even take concrete form; for instance, if you went on a mission trip together to provide relief in a disaster-stricken community, or if you joined a Habitat for Humanity build closer to home.

Putting your values into practice like this not only educates the next generations about the importance of giving from a conceptual perspective, but ensures that they will have clear memories to look back on — memories that will keep your family’s philanthropic legacy going long after you’re gone.

Parting Thoughts

To wrap up: the three family wealth planning secrets we’ve discussed here — transparent and communicative generational planning, relationally-oriented tax planning, and philanthropic kindness — can be powerful tools in the hands of high net worth families. By implementing these strategies, you can ensure that your wealth not only endures but grows and serves a meaningful purpose for generations to come.

Remember, the key to your family’s financial future lies in proactive planning. If you’re ready to take the next step in your wealth planning journey, why not reach out to Iron Point Financial today to schedule an appointment at a time that is convenient for you? Our team would love to sit down with you to understand your family’s unique needs and to provide expert, personalized guidance.

And if you enjoyed this article on family wealth planning, why not sign up for regular email updates from our blog, so that you don’t miss future posts?

Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA. 

We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.

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