Protecting Generational Wealth: Shelly Joyner, Associate

Protecting Generational Wealth: Shelly Joyner, Associate

Generational wealth is a relatively simple term with broad connotation. It is defined as simply the passing down of assets from one generation to another. Generational wealth sort of sounds like a reason for a Vanderbilt to never have to work a day in his life because he has generational wealth. However, generational wealth should be a concern for all of us so that our financial legacy is protected, even if it’s a small savings account and not the Biltmore Estate.

Here are a just a few ways that you can protect more of your hard-earned assets for future generations:

  • Keep beneficiaries from spending irresponsibly. Do you have a beneficiary in mind that would spend the entire amount within hours of receiving it? A trust can be easily managed in a way that puts restrictions on how and when a beneficiary receives money. One common way to accomplish this is to write beneficiary trusts that give someone 25% of their share at age 30, 25% at age 35, 25% at age 40, and the rest at age 45. One of our clients even had her children’s trusts held until age 65 because she knew that her adult children weren’t saving for retirement. 
  • Make sure beneficiaries get support after high school. One of the most reliable ways to ensure future financial success is to keep learning after high school. A very common provision in estate planning is making sure that younger beneficiaries receive assistance for college or vocational training. Trusts often contain provisions saying something like “10% to my nephew, Jack, to be used for his educational expenses, and the remainder of his unused portion can be given to him outright when he graduates or when he attains age 40, whichever is sooner.” This not only leaves money for his education, but it also entices him to seek higher education. It also indirectly entices him to get scholarships and save for education expenses, because the remaining money goes to him outright if it isn’t used for tuition!
  • Ensure proper mineral rights transfer. Since we’re in Texas, let’s talk about oil. Many Texans own mineral rights (usually passed down to them from ancestors). Proper transfer such assets from generation to generation ensures that any current and future royalties stay within the family. A common way to accomplish this “proper transfer” is to place mineral rights into a revocable living trust. Proactive planning, whether by will or trust, is essential to protecting mineral rights for future generations. 
  • Do business continuity planning. Raise your hand if you are a small business owner! Do you have a rental house? Do you have a handyman service? Do you have commercial rental property? Do you have a more formalized business? Appropriate transfer of business assets is a wonderful way to leave an intentional legacy for future generations. Completing a business continuity plan connects your financial legacy wishes to future beneficiaries.   
  • Research tax planning needs. There is a lot of misinformation regarding the “Death Tax.” First and foremost, there is no federal tax penalty for dying. In 2021, the individual Federal Estate Tax cap is $11.7 million. So, basically, if you have less than $11 million dollars, you don’t need to worry about completing complicated trust planning to avoid the 40% tax. Lucky you! However, if you’re burdened (😊) with more than $11 million, you should immediately get to work with a qualified estate planning attorney to plan accordingly.
  • Avoid spending estate monies on court fees and Medicaid recovery.  Save your family and loved ones thousands and up-to hundreds of thousands of dollars in the future by protecting assets from future probate and Medicaid estate recovery costs.  A reasonable expectation for court, attorney, and realtor fees for an uncontested probate in the DFW area is about $10,000. (If family members fight, probate costs will continue to climb until the family stops arguing or the money runs out.) If you “don’t have much” then you definitely want to ensure that none of your assets are wasted by having to probate a will. A revocable living trust can avoid probate and all associated fees. Additionally, a trust can avoid the Medicaid Estate Recovery Program (“MERP”) that’s administered during the probate process. MERP is how the state government is “paid back” for any money that Medicaid spent on you during your life through the sale of your home. So, if you want to make sure that your daughter gets your house when you pass away, you want to avoid probate.

The successful passing of assets builds generational wealth over time. Email us today or comment below with your recommendations on how to build generational wealth.

4 Comments
  • Larry Bickel
    Posted at 10:15h, 17 February Reply

    I am desiring info on not using what wealth we have on long term care.

    A way we could use Medicaid not our money

    • admin
      Posted at 11:06h, 17 February Reply

      Good Morning! Great question. There are ways to use various types of restrictive trust planning and financial planning tools to avoid Medicaid costs; however, there are some intricate management instructions that come along with these tools. The best way to learn more about the ins and outs is to talk 1:1 with one of our attorneys. Call or text 972-560-6288 to find a time that works for you.

  • Mike Bowers
    Posted at 10:50h, 17 February Reply

    Great info Shelly. Thank you for sending this out. Mike B.

    • admin
      Posted at 10:55h, 17 February Reply

      Protecting generational wealth is a passion here! Hope you are doing well, Mr. Bowers!

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