Rags to Riches: 3 Estate Planning Tips for The Self-Made

by | Aug 3, 2022 | Estate Planning, Heirs And Beneficiaries, Trust Administration |

We have all heard horror stories about wealth that passes down from one generation to another and does not pass the test of time. One of the most infamous examples is the fortune of Cornelius Vanderbilt, who would be worth $242.8 billion in today’s dollars after inflation. This wealth should have lasted centuries, but the reality is quite the opposite. Just one century after Mr. Vanderbilt’s death, not one of his family members was even a millionaire.

So, what happened? A lack of a proper estate plan with restrictions and conditions succinctly sums up how the fortune was mishandled. The Vanderbilt family teaches us a harsh lesson on the dangers of leaving our assets up to chance, faith, and others’ judgment. With this in mind, here are three tips we’d like to share for the self-made:

You have more to lose from a DIY estate plan

For every client, we highly advise against DIY (do it yourself) estate planning, but this is especially true for those who have worked decades to get to where they’re at. Estate planning is rife with complexities and moving parts that necessitate a tremendous deal of expertise to get correctly.

The first thing to remember is that there is no universal template that will work for everyone! As you might expect, an estate plan for a married couple or a family with children will differ from one for a single person. Additionally, someone who owns investment homes or a small business will require a different estate plan than someone who solely owns a primary residence. Therefore, there is no way that a single estate plan template can cover all possible circumstances. Anything advertised online as a DIY is unlikely to include all of the terms required for your individual situation.

Your decisions now affect the preservation of your wealth, even after you’re gone

You may worry that money be a detriment instead of a blessing to your child. How do we take the fruits of your labor and give this wonderful gift to your children without failing them?

A lot of clients do not like the idea of dumping a windfall of money all at once. If we put ourselves into the shoes of a child who receives a windfall as soon as they turn 18 (say a million dollars), what do you think you’d spend it on? Would you have had the drive to strive for a career you love? Would you have had the maturity to save and not spend it on material pleasures? How long do you think this sum of money would last you? Your answer determines how productive this money is in the long run.

You can construct your plan so that money can be made available for a certain purpose. For example, the money can be used for education expenses, self-development, medical bills, emergencies, support, etc. You can also release money in stages or installments. Perhaps you’d like your children to work and build their careers, like you did, but with the peace of mind that there is a safety net behind them should they need it. Crafting an estate plan gives you countless opportunities for flexible money distribution that allows you to provide for your children on your own terms.

Lack of communication among family members is one of the most significant contributors to generational wealth depletion.

The fear that knowledge of an inheritance will promote a sense of entitlement in their heirs drives a lack of communication from those who have accumulated the money.

However, a lack of communication might result in unprepared heirs unaware of the wealth transferor’s overarching goals and values. While it may be challenging for some to discuss wealth transfer with their successors, it is necessary to develop a meaningful, multigenerational plan to ensure the family wealth is preserved beyond the second and third generations. A frank discussion of your overall goals and ultimate wishes, as well as a disclosure of your net worth and estate plan should be included in this communication to future generations.

Protect your wealth as soon as possible!

Our knowledgeable attorneys can help you draft an estate plan that preserves your legacy. Our mission is to educate clients on their various options to protect assets and ensure wealth preservation for generations to come. If you’re ready to take control of your estate plan, get in touch with us online or by phone at 818-676-9572 to set up a free consultation today.

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