Are you struggling with your finances and often think that your life might have been easier if you inherited a generation of wealth that would support you in your tough days? Or wished that you graduated without a burden of debt?
If you are one of a kind who achieved everything in life early just because you were backed by financial support from your family. Either way, you must have gotten the idea behind the term generational wealth without even beginning to discuss it.
Simply put, generation wealth is a process that boosts your financial capability of making your future plans. The process can be about the future of your children and grandchildren and so on.
Probably you are already surrounded by your financial hardships right now but don’t want your family to experience the same.
If you are thinking about building your family soon, then it’s high time that you should know how to build generational wealth.
What is Generational Wealth?
By definition, generational wealth is also known as legacy wealth or family wealth. No matter what you call it, it represents the wealth that is passed on from generation to generation.
It is the number of financial resources that you leave behind for your family members. It includes real estate, business, investments in stock, everything that has a monetary value.
The first generation needs to accumulate the finances from generational wealth with proper planning so that it can be passed down to the next generation.
To comprehend the term more clearly, let‘s take an example of a couple, John and Amanda. The couple lived a humble background, their own parents faced challenges to meet their ends.
At a point in life, they realize that their family will not live through the same and they will manage to save through a savings account. Through this, they planned to bequeath the savings to their only daughter Linda. Years later, Linda took the inherited wealth to build a business and saved her assets and a part of profits for the next generations to come.
In the above-mentioned example, it is clearly visible that making wise decisions at the appropriate time came out to be beneficial for the whole generation and the rest to come. However, creating family wealth is not easy, plus there is a chance of generational wealth inequality that may come across between members.
But with proper planning, it can also be done wisely. Creating generation wealth comes in many forms. Business or saving accounts are just an example of those. Some other examples include:
- Real Estate
- Investments in stock
- Life insurance policies
- Heirlooms and antiques
- Family business
- Collectible items
How to build Generational Wealth?
Sometimes it’s hard to go against someone who knows the importance of making generational wealth. This stands perfect for someone who’s planning to start a family or have children. If you have found yourself somewhere in between, then you may be wondering what to do next. Following are some options that explain how you should be beginning the process of generating generational wealth.
Set up a trust
Setting up a trust fund is one of the most protected ways of generating generational wealth. It is a powerful tool to generate and manage your wealth where you can have more control over selecting the beneficiaries and to manage how your savings would be passed on.
It is also beneficial in a way when you don’t want your finances to be deducted in terms of taxes and probate. This means that the inheritance of your children will be safe from legal fees and a percentage of taxes that might affect your savings.
Plus, it will be in your control to decide the conditions like when your children will be receiving the heirship. For instance, you can designate a certain age or milestone for your children to receive inherited wealth.
Invest your money
Appreciation of the currency and the investment done at an appropriate time will automatically increase your wealth without making much effort.
Vigilantly putting your money into the savings account is undoubtedly laudable, but your next generation may not reap the same fruit due to the inflation and depreciation of the currency. Therefore, instead of saving in a depreciative process, investing in something that grows with time would be fruitful for your upcoming generation.
If you are searching for options to consider for investing, here are a few:
- Digital currencies
- Real Estate
- Certificate of Deposit
- Retirement investment accounts
- Mutual and exchange-traded funds
Start a business
If you possess an entrepreneurial disposition, research and find out the best business to start with your current available resources and finances. According to the research, only 20% of Americans own 80% of annual GDP from inherited wealth. This means if you want to know how much wealth is inherited in the world, then you would know that the world contributes up to 57% of US GDP in inherited wealth.
On the other hand, if you run a successful business, you can pass it on to future generations. They can choose whether they want to continue or sell it to start something else.
Start Planning to Build Your Generational Wealth Today
There is no specific time to start building generational wealth for your family. However, it has to be done as early as possible. Wealth often compounds with every passing time, so the earlier you begin, there will be more time and wealth that you will secure.
While you consider generating wealth for your family, do consider the above-mentioned steps. For best practice, keeping your wealth in a trust fund is a better way to secure it from additional probate and property tax deductions.
Whatever you decide, talk to an attorney to legally create generational wealth and to determine the milestone to achieve the inherited property for your future generations.
To have a detailed look at how to find a compatible attorney who can guide you legally with experience in estate planning, see here. Plus, if you need guidance in creating a will for the distribution of your assets read this.
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