How long will your financial legacy last

How Long Will Your Financial Legacy Last?

If you are like most people, the ultimate motivation for working hard and building wealth is to provide a good life for your family and to create an enduring legacy for future generations. The question is how many years will your money last, assuming your children and their children are able to provide their families with the same advantages they enjoyed growing up?

The time and effort you put into planning your financial legacy will certainly help your children, but it may surprise you to hear that the average lifespan of family wealth may not go further than them. It’s estimated that 60% of affluent families lose their wealth in the 2nd generation and a whopping 90% by the third.

Even if your fortune falls into the latter category, lasting three generations, it’s possible you will be around to witness its demise. There are a number of factors that go into these statistics, but suffice it to say, protecting your financial legacy from this outcome should be an important part of your financial planning process.

The General Rule

Why do 90% of families lose their wealth so quickly? Part of the answer is that with each generation the standard of living increases. As adults, many expect to live at or above the lifestyle that their parents provided for them and endeavor to offer their children even more advantages than they had. By the time three generations have passed, your wealth must be able to cover a much higher standard of living.

Another factor to consider, when calculating how long your financial legacy will last, is the fact that families grow over time. The addition of new members through marriage, childbirth, second marriages, and step-children, means the money that once supported your family of four in style, must now be stretched to accommodate 4-5 times that number of people.

Taking all of these factors into account with regard to financial planning and investing for the future will help your family to be part of the 10%. You’ve gone to great lengths to build a nest egg for generations to come and you don’t want to watch it dwindle away.

Being Part of the Other 10%

With proper legacy planning, you can be among the families that retain their wealth into the fourth generation if you are proactive with regard to installing safeguards to protect your money. Despite all of your savvy investing and careful portfolio management, one financially devastating lawsuit could wipe it all out. To prevent this from occurring, you may want to talk to a qualified attorney about enacting an asset protection trust.

Posted in Succession, Updates.