Strategies for Wealth Succession Planning

Withgreat wealth comes great responsibility. And this responsibility doesn’t end at death.  Here are some effective strategies adviserscan use to prevent wealth from dissipating through generations: 

1. Give in trust.  Outright gifts are subject to creditorclaims, divorce settlements, and direct mismanagement by the descendant.  Use a trust with a spendthrift clauseinstead.
2. Think long-term.  Don’t give millions outright to a 25-year-old.  Use perpetual or “dynasty” trusts to providefor descendants throughout their life as well as future descendants.
3. Customize‘best-interests’ clauses.  Create distributionclauses based on the best interests of the descendant.  This clause can be specifically defined,allowing for clients to use their own preferences and philosophies to shape thetrust.
4. Create a familyoffice.  Using a business entity,like a limited liability company, as a family office focuses on the wealth asan investment opportunity instead of a mere inheritance entitlement.  Be sure to create a family wealth governancedocument.
5.  Start early.  Educatedescendants early on about the family’s wealth and overriding philosophies.
6. Be philanthropic.  A focus on charitable giving can unite the familywhile reinforcing the good side of being fortunate financially.
7. Coordinate counsel.  A cohesive group of advisors are necessary for asuccessfully structured wealth plan.

See Jim Duggan, Avoiding Wealth’s Death Spiral,Financial Advisor, Nov. 7, 2013.

Special thanks toJim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringingthis article to my attention.