Thursday, 21 February 2019
For most people, the idea of inheriting significant wealth doesn't seem like a bad thing.
And of course, it isn't. But it does come with some significant responsibilities and potential risks.
“The type of wealth that is transferred from one generation to the next has to be sustained, nurtured and protected so that it can continue to support the current generation and provide for generations to come," said Randy Bond, BBVA Compass Chief Fiduciary Officer.
If that responsibility falls to you, here are some potential pitfalls to be aware of:
With the inheritance of wealth frequently comes increased attention from outsiders, or even those with close relationships. The potential windfall can prove tempting for those who might consider lawsuits or fraudulent efforts to access cash. With proper trust planning, that inherited wealth can be protected from direct access as the result of either.
The goal for transitioning generational wealth is always vertical, to the next generation. However, family situations can arise that may jeopardize that transition, threatening to spread the inheritance horizontally, particularly in the case of divorce. Rather than put heirs in the unpleasant position of requesting premarital agreements, trusts can be set up to ensure that wealth transitions as intended regardless of marital status.
Other than mismanagement, taxation is the largest single cause of erosion over three or four generations. The good news is that proper tax, trust and estate planning can go a long way toward mitigating this risk and protect your family wealth for generations to come.
The responsibility of inheriting multi-generational wealth can sometimes feel overwhelming. It's important to surround yourself with professionals whose advice and counsel you trust and whose credentials you respect. Whether you choose to establish a co-fiduciary, with whom you share decision-making responsibilities, or a corporate executor who manages everything on your behalf, a private banker can help you through the process.
The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or financial advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates.
Terms and Conditions:
|Securities and Investment:|
|ARE NOT DEPOSITS||ARE NOT FDIC INSURED|
|ARE NOT BANK GUARANTEED||MAY LOSE VALUE|
|ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY|
First generation founders of successful businesses often ask: “Are we preparing the next generation in the right way, such that they are ready when we ‘pass the baton’ to them?”
When an elderly family member can no longer manage money due to mental illness, you may need to step in. Here's what to look out for.