Managing family wealth can be a very tense and turbulent activity. As the future is ever-unpredictable, alongside risk and losses eating into wealth, there is also inflation and contending inter-family ideologies to deal with.
Family wealth planning and supporting each family member with said wealth in the ways they prefer can prove to be an ultimate challenge, alongside everything else. To make a family’s economic future a little more promising, tips for managing family wealth can prove essential.
Tip #1: Prioritize Strong, Healthy Family Relationships
Family wealth is much easier to manage when there’s trust and accountability between family members. All children, grandchildren, and heirs should understand the importance of family wealth and be ready to participate in its management.
Tip #2: Communicate Intentions and Plans to All Family Members
As family wealth plans come together, you don’t want any surprises. Communicate intentions directly to family members so that they understand their role.
Furthermore, if there are disagreements, different expectations, or different goals that certain family members share, these are all discussions to have in the open and work to resolve.
Tip #3: How Much You Want to Leave
There is much to consider about leaving or distributing to heirs and children. Many factors exist, such as the expected standard of living, education costs, and more. Many families want to create incentives for heirs to motivate them to manage their money wisely and gain financial prowess over time.
Tip #4: Have Annual Family Meetings
Minimize the risk of potential future litigation and conflicts with an annual family meeting to check in on everything. This can also discuss whether to involve spouses or extended family. Hold each other accountable and assess whether there is still agreement on how family wealth is managed in the present and plans for the future.
Tip #5: Have a Succession Plan
If a family business is involved, this may form the primary discussion around intergenerational wealth transfers as it involves tax, legal, and financial planning. Some family members may not wish to remain committed to its ongoing success and want out.
Heirs may not be involved in the business or outside the family. This can all make family business success planning particularly challenging. Consult with a financial advisor to create the best plan possible.
Tip #6: Create a Diversified Asset Portfolio
With wealth, it’s key to use it to create more wealth and to generate income. This is largely done through allocating funds to specific assets in a diversified fashion and creating passive income or something close to it.
Tip #7: Be Aware of Taxes
Taxes come at a high cost for wealthy individuals. They can easily pay hundreds of thousands in taxes, making the wrong moves. Have a tax expert you can count on.
Work to reduce capital gains. Dispose of securities and assets with lost value. Manage your taxes in the smartest way possible because it will save you significantly, even within a calendar year.
Tip #8: Protect from Taxes and Liabilities
Surplus assets are wealth you did not expect to have and will not likely use in your lifetime. Strategies must be considered for these assets to protect against high taxes and potential liabilities.
To better manage surplus assets, one might wish to organize lifetime gifts and trust planning, purchase a tax-exempt life insurance policy, or organize a charitable giving initiative.
Tip #9: Do Not Stick to Any Individual Investment Category
You may have earned the entirety of your wealth through a single type of investment. This does not necessarily mean you should stick with this individual investment long-term. When you stick with a single investment category, you open yourself up to great risk should that category fail.
Tip #10: Have an Estate Plan That Is Legally Defined
Ensure a plan for what will happen to certain assets and wealth upon the head family member’s death. This may involve making multiple wills and succession plans and selecting beneficiaries. This is key to ensure there are no disputes in the aftermath of a death and to ensure family wealth is protected according to the wishes of those at the head of the family.
Tip #11: Define The Legacy You Want Your Family Wealth
You may consider the legacy you want your wealth to leave behind. Many families set up charitable foundations or pursue the avenue of charitable contributions to ensure that they are doing some greater good with their wealth, in addition to reaping the tax benefits. There are many facets to legacy, which may be an ongoing discussion among everyone in the wealth management circle.
Tip #12: Keep an Eye on the Results
Implementing financial strategies and goal-setting into family wealth management is an important start. However, monitoring the results is necessary. Ensure strategies are working. If they aren’t, alter them or discuss alternatives. Always review what you’re doing and ensure the predicted results are what you’re getting.
