There is a reason many small businesses have “& Sons” in the name. People like the idea of building a business to pass down to their children. The Census Bureau states that 90% of all business enterprises in North America are family firms.
However, while almost 70% of family businesses state they want to pass the company to the next generation, only about 30% are successful in doing so. Businesses can be very profitable long-term, but it’s crucial that whoever takes over the business has interest in the industry and knows how to operate a business. How to pass down generational wealth
As with any long-term financial goal, you need to have a plan to achieve it. In the case of generational wealth, that includes preparing for a successful transfer from you to your beneficiaries.
Get your affairs in order
Don’t wait until you have a medical issue or are well into retirement to get everything in order to pass down your wealth. Life is uncertain. Some things you can do to prepare include:
These actions can ensure a smooth transition of wealth and will minimize headaches for everyone later. But perhaps just as important as transferring wealth is passing on information on how to handle money.
About half of all inherited money is spent or lost investing poorly, with the other half saved. Furthermore, Chris Heilmann, U.S. Trust’s chief fiduciary executive, states, “Looking at the numbers, 78% feel the next generation is not financially responsible enough to handle inheritance.” In other words, giving people money isn’t enough. You need to ensure they have financial literacy.
Fortunately, there are many ways for individuals to learn about finance if you don’t have the bandwidth to teach them personally. You can encourage taking courses on finance in high school and college, watching informational videos online through services like YouTube or Khan Academy , or even read highly-regarded personal finance books. To appeal to younger generations’ preferred digital learning style, you can also recommend finance apps geared toward young adults .By building generational wealth, having proper documentation prepared and teaching beneficiaries how to handle money, you’re setting them up for future financial success.
The earlier you start building wealth through stocks, real estate and business endeavors, the more wealth you will be able to accumulate. Your family’s generational wealth can begin with you.
<EMPHASIS> <INTERNET LOCATION="EXTERNAL" URL="mailto:email@example.com">Riley Adams</INTERNET> is a CPA and the author of the <INTERNET LOCATION="EXTERNAL" URL="https://youngandtheinvested.com/">Young and the Invested</INTERNET> website, which focuses on financial independence and investing. This column was adapted by the author from a post on that site</EMPHASIS>.