To pass your wealth down to future generations, you should make correct decisions to ensure it doesn’t erode over time. According to estimates, families may lose up to 70% of their wealth by the second generation.
To ensure that your family does not fall in the above category, you should consider legal ways to protect your wealth. For proper financial and strategic planning, you may even consult an experienced attorney to guide you.
Let’s look at four legal ways to help protect your wealth for future generations.
1) Clear off your debts
Saddling your descendants with unpaid debts is not something that you’d like to leave behind as your legacy. Getting out of debt as quickly as possible is crucial if you’re looking to preserve your wealth for future generations.
To do this, first clear your high-interest debts such as personal loans or credit card debts. The next step is to consolidate any other debts so that you have to pay as little monthly interest as possible.
The final step is to try and pay off something extra apart from the interest every month so that you can make a dent in the principal amount and repay your debt faster.
2) Invest in real estate
For decades now, people have been investing in real estate to multiply their wealth. You should acquire property that is likely to appreciate over time. Examples of such properties are commercial and residential properties in high-demand areas.
One of the financial advantages you’ll get after investing in such properties is a steady monthly income in the case of rental properties. You and your descendants are also likely to enjoy substantial capital appreciation after a few years.
Keep in mind that you should make a will while you are reasonably hale and hearty, listing all your assets in it to ensure that future generations get clear title to all your properties. Nowadays, you can take the help of online services to write your will.
The bottom line to keep in mind is that real estate is one of the most tangible assets you can leave behind for future generations.
3) Set up a family trust
Another important way to protect your assets is by setting up a family trust fund. A trust fund is a legal entity with the help of which you can protect your assets such as cash, property, and other investments.
There are many types of trusts, including living trusts and special-needs trusts to name just a few. There are many examples of trusts for wealthy families that you can emulate to protect your wealth legally.
If you decide to create a trust, you need to sign a Trust Agreement, which is a legally binding document. Having expert legal assistance while creating a trust is a good idea as trusts may be complicated and may need to adhere to complex rules to be valid.
4) Stocks and other financial instruments
One of the best ways to protect your wealth for future generations is to invest in blue-chip stocks and bequeath them to your descendants. Consider an investment in the stock market as part of your long-term financial goals.
Diversify your portfolio and invest in other financial instruments such as bonds or commodities. If you hold such investments for an extended period, then more likely than not, they will multiply in value.
Various studies have shown that stocks tend to generate superior investment returns compared to returns from other asset classes. Hence, having a solid stock portfolio is perhaps one of the greatest gifts you can leave behind for future generations.
Keep in mind that your assets may get compromised due to various reasons out of your control. Hence, wealth preservation strategies should be one of the main components of your wealth management plan. To get proper guidance, you should consult a financial advisor or an estate planning attorney.