Navigating Estate Planning for Multigenerational Families

If you have created an estate plan to protect your spouse and children in the event of your death, you are already ahead of most people—the majority of American adults don’t have an estate plan. But if you have accumulated some wealth, or built on wealth that you have inherited, you may want to think about estate planning for multigenerational families.

Estate planning for multigenerational families means thinking beyond your own children to preserving wealth for grandchildren and perhaps future generations. Even if you have significant wealth right now, it’s a mistake to assume that that wealth will continue to grow for your family without careful planning.

Why Multigenerational Estate Planning Matters

When one generation accumulates wealth through hard work, they have a natural appreciation for what it took to build that nest egg. They may save carefully, perhaps hoping to spare their children from financial struggles that they themselves experienced.

The second generation grows up with a level of financial security their parents may not have known until later adulthood. They may lack an appreciation of both what life was like without wealth, and what it took to build. By the third generation, there may be little wealth left. But it doesn’t have to be that way.

There are many people who view themselves as stewards of the wealth they have inherited, and they take measures to preserve and increase it, as well as to educate their children and grandchildren to do the same. Working with an attorney who understands estate planning for multigenerational families can make the difference between wealth that lasts for a generation or two, and wealth that continues to provide opportunity and security for many generations.

Multigenerational Family Estate Planning: A Unique Opportunity

If you have family wealth that you want to preserve for future generations, calling an experienced estate planning attorney is the first step. It’s not necessary for you to know what estate planning tools need to be put in place; that’s something that your attorney can advise you on. You simply need to identify what you want to achieve (and your attorney can help you clarify that, too).

Are you looking to protect family wealth from reckless spending by your children and grandchildren, or to protect assets from potential future creditors? Do you want to minimize exposure to estate tax? Are you hoping to instill a sense of social responsibility and an interest in charitable giving? Do you want to ensure the continuity of a family business? All of these can be achieved with the proper estate plan in place.

At this moment, you have a unique opportunity to make a difference to the lives of your grandchildren and great-grandchildren—and the world they will live in. Let’s discuss some of the estate planning tools your attorney may suggest to achieve your goals.

Trusts as Multigenerational Estate Planning Tools

Trusts are not just for families with wealth; many families can benefit from the control and flexibility a trust provides. But for families that want to preserve generational wealth, use of one or more types of trust are highly recommended. All trusts keep assets out of probate (and thereby keep information about family wealth private). Avoiding probate also means that the successor trustee of a trust can immediately assume management of a trust after the original trustee’s death or incapacity.

Some types of trusts you may want to consider include:

Discretionary Trust

As the name suggests, discretionary trusts give the trustee the discretion whether and when to make distributions, and of how much. Because trust beneficiaries are not automatically entitled to distributions, it becomes much more difficult for their creditors to reach trust assets. Obviously, creating a discretionary trust requires selecting a trustee whose judgment you trust and whose vision aligns with yours.

Ohio Legacy Trust

An Ohio Legacy Trust is a type of domestic asset protection trust. It is a type of irrevocable trust authorized by the Ohio legislature that shields assets from future (not current) creditors and, unlike most irrevocable trusts, allows the person creating the trust (the trustmaker) to also be a beneficiary.

Charitable Trust

For those with an interest in philanthropy, charitable lead trusts and charitable remainder trusts can be used to support a favorite charity or charities while also providing income or wealth for one’s family.

Irrevocable Life Insurance Trust (ILIT)

An irrevocable life insurance trust helps minimize exposure to estate tax by ensuring that the proceeds of a life insurance policy owned by the insured are not included in the insured’s taxable estate. These are only a few of the many types of trusts that can be used to protect and preserve generational wealth. Speak with your estate planning attorney to determine what trusts are best for your family’s unique needs.

Other Estate Planning Tools for Multigenerational Families

While trusts are extremely valuable estate planning tools, they are only part of a comprehensive estate plan for multigenerational families. All estate plans should include powers of attorney and medical advance directives for incapacity planning.

A 529 plan can help to save for a grandchild’s education. If you have a particular concern regarding planning for your multigenerational family, your attorney can help you address it. To learn more about estate planning for multigenerational families, or to begin planning for your own, contact Gudorf Law Group to schedule a consultation.