7-Step High Net Worth Inheritance Planning Guide
Advice to High Net Worth Heirs: Don’t Be Part of This 90%
Are You Going To Be A High Net Worth Beneficiary? Here’s Your 7-Step Inheritance Wealth Management Planning Guide. Furthermore, before you continue to read these articles, you can click here to read our exclusive guide on how to find a financial advisor for managing over $10 million in liquid assets.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
One study found that 90% of inherited wealth has completely vanished by the third generation. For example, the founder of the John Forsyth Shirt Co amassed a fortune through his business of about “$70 million in today’s dollars,” according to his grandson. Why is that so? Because most of these beneficiaries don’t have the information to manage their assets and property adequately. Most parents don’t talk about their assets with their kids.
This is why the inheritance didn’t even last for three generations. Even when they have a question like: Do I need help from a personal financial advisor to make an inheritance or estate plan or manage my property? They just asked without acting. Bad decisions, bad luck, or even alcohol are reasons why their bequest ran out. Even when they do nothing with their bequest, some run out due to inheritance taxes and estate taxes. That is because they have no inheritance plan at all.
You’re far from immune to this. This case happens to 90% of high net worth families. Their wealth ran out before they opened retirement accounts or didn’t even think about life after retirement at all. And to be clear on our terms: If your upcoming heritage pushes your net worth into the multi-millions, you are receiving a high net worth estate. Therefore, you need to make an inheritance plan.
If you’re in line to inherit from high net worth or ultra-high net worth parents, this is a warning for you. Below are responses from individuals who inherited upscale wealth.
3 Responses of the Beneficiary
1) Do nothing, make no plans, and accomplish nothing
In this scenario, with the money and estate you’ll one day inherit, it just sits there. Perhaps you add it to your current accounts and act as if nothing has changed. You don’t waste it, but you don’t do anything with it either. If you’ve already achieved high net worth status yourself without being a beneficiary, this isn’t the worst option you could choose, but it’s not the best either. Because after all, if you inherit an estate, then you will be subject to inheritance tax and estate tax.
2) Do something, make no plans, and squander large portions of it
Here, you take the money, don’t have any information on managing it, and use it recklessly or irresponsibly. This is by far the most common behavior observed after receiving a high net worth inheritance, as you’ve already seen. And to be clear – often this happens because the heir hasn’t been shown how money works or how to steward it so their life prospers. The solution here isn’t to vilify or ridicule. It’s to choose response #3 instead.
3) Do something – with smart planning – and maximize your use of it
Here, you’re using your assets and estate for the greatest possible positive effect it can produce for you, other people, and the causes you to care about. How you manage a high net worth inheritance depends greatly on when you receive it. Being a beneficiary in your 30s is very different from getting one in your 70s. And receiving an inheritance does not have to change your life radically. But it has great power to make it better if you defer any major decisions until you’ve put a plan in place.
If you need help finding a financial advisor to make this happen through inherintance planning, click here to read our exclusive guide.
7-Step High Net Worth Inheritance Planning Guide
You must set time aside, without emotion, to plan how you intend to use the wealth you’ll one day inherit. You’ll likely want to involve your spouse and perhaps your siblings or any family member you trust in this discussion.
Depending on your circumstances, you might want to begin this discussion while your parents are still living. In fact, they might want to share a few insights and some recommendations with you in a good way.
Here’s a seven-step guide to planning how to activate and enhance your life with your high net worth inheritance.
1) List Out Your Biggest Goals, Dreams, and Desires
At this point, you’re not getting ultra-specific. You want to get an idea of what everyone at the table has been harbouring in their hearts for many years that they now see an opportunity to act on.
These could include general ideas like travel, starting a business, launching a foundation, giving to charity, investing in real estate, funding a movie production, developing a product idea.
You’ll get more specific about these in part 3. But whether it’s just you receiving this inheritance or several other siblings or any other family members who will also be at the table and part of this discussion, you need to know what you want.
This forms the foundation of your planning and will guide the rest of the process as a foundational component.
To learn more about the importance of planning and setting goals in wealth management, click here to order a free copy of our hardcover book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million.
2) Assemble Your Team of Expert Professionals
Bring on high net worth specialists who can help you work out the details of how you’ll use your inheritance. These experts include your estate planning lawyer to do probate (so you can pass some of this on to your heirs and not fall into the 90% who fail at this), a tax attorney, a wealth manager, perhaps an accountant, and others depending on the details. They will assist you in doing your inheritance planning, including your estate planning and estate taxes. Also, they will provide you with the information you need to manage all of your assets wisely.
The key is, you want professionals who are familiar with high net worth scenarios.
That way, they will know what questions to ask. They’ll suggest ideas you wouldn’t have thought about. They’ll recognize warning signs you would have missed. Including inheritance taxes and estate taxes, if your inheritance is in assets or estates form. They will make a customized estate plan just for you.
In short, they’ll protect you from yourself and from other people who might try to prey upon your new burst of wealth and assets because problems can come from anywhere and anyone, even from our loved ones or family members. Because under certain circumstances, a family can be the biggest enemy. This will help you avoid future family disputes.
Pillar Wealth Management works exclusively with high net worth households, and we have 60+ years combined experience working in this speciality. We can be your estate planning attorney. We personalize inheritance plans or estate plans for our clients, depending on their needs. We have seen it all, and we know what you’ll be facing if you’re about to inherit seven, eight, or nine figures.
3) Make Specific Spending Plans
There’s nothing wrong with spending some of your inheritance on things you enjoy. But it would be best if you got specific about how you’re going to spend it and how much.
Maybe you’ve always wanted to attend the Olympics in a faraway land, and this bequest enables you to spend a month in a foreign country enjoying the entirety of the Games. Or quickly transfer from one country to another overnight. You are maybe investing a real estate.
Maybe you have a side business idea you’ve wanted to try out, such as build your own, and you want to use some bequest money as seed capital. Maybe you want to become parents that spoil their kids. Even if your idea doesn’t pan out, that doesn’t mean you shouldn’t use this opportunity to try. Or, perhaps one of your kids is getting married soon, and you’ve always wanted to throw an extravagant wedding. Now’s your chance.
There are many practical yet costly ways to spend parts of your bequest. The reckless approach starts spending, doing things you’ve always wanted to do, with no concern for the long-term damage it does to your finances. Making an estate planning strategy is not easy. However, with thoughtful financial planning and estate planning, you can achieve some of these lifelong goals and dreams and still burnish your long-term financial security at the same time. That’s the ideal approach to managing a high net worth inheritance:
Aim to strike a balance between what you’ve always wanted to do, making your loved ones happy, and your long-term financial health and prosperity.
With detailed planning, your wealth can last a long time. Make your inheritance plan now. Click here to read our guide on the 5 essential shifts that all high net worth individuals must make.
4) Make A Personal Estate Plan
The essential outcome of every wealth management plan – inheritance or not – is long-term financial health and security.
No matter how much money and assets you have now, when you become the beneficiary, you’ll have quite a bit more. This allows you to strengthen and solidify your investment planning.
This process requires substantial effort. It’s not just as simple as tossing the inheritance money into all your existing accounts. It would be best to account for tax implications, such as inheritance taxes and estate taxes. Where money gets put and how and when it gets put must be carefully worked out.
Your tax attorney and your wealth manager will show their greatest value in the process.
The primary focus here will be on long-term growth and optimized performance. What can you do with this estate, and how much should you set aside for investment goals so you can stabilize your finances for the rest of your life?
Here again, you want a wealth manager in the room during these meetings who only works with high net worth households. You only get one shot at doing this right. Pillar has sat in on many of these meetings. We will give you valuable information on managing your property and estate and making a personalized estate planning and investment strategy based on your needs.
If you are having trouble finding the right financial advisor, click here to read our exclusive guide on how to find a financial advisor for families having over $10 million in liquid assets.
5) Do Inheritance Planning
Depending entirely on your life circumstances (such as age), doing inheritance planning for your heirs could look very different. If you are on this page (become future parents), we are better prepared for the worst-case scenario because we do not know when death will come. You need preparation to choose the best way to manage your legacy, whether it’s your children, grandchildren, loved ones, or anyone you trust.
You may want to use this opportunity to make significant changes to your own estate plan the older you are. But that’s not your only option. For instance, if you have kids (or grandkids), they might need help in ways you can act on immediately. They may be in private K-12 schools. You can contribute to their 529 plans, which now can be used for K-12 and college. Or, you could pay for their schooling directly.
You could also choose to be the parent that funds their Health Savings Accounts to the max for a period of years to build up their medical nest egg. Or help them buy a home or an estate or upgrade their existing one.
Depending on the size of your inheritance, many such options may now be on the table. If one of your life goals and dreams (listed out in part 1) is to ‘help your beneficiaries’, here is where you’ll get specific about how you plan to do that. Creating an inheritance plan or an account for beneficiaries may be one of the most important things you can do.
For instance, your investment portfolio can play a critical role in determining the size of your inheritance. To learn more about this, click here to read our exclusive guide on improving portfolio performance.
6) Make Philanthropic Plans
This again falls into a general category of a life goal that you can now act on. It’s quite common for people who inherit wealth to want to give some of it away. Take some time to explore your values and the causes that align with those. Find charities and nonprofits that fit with what you want to accomplish. Settle on the amounts you want to give. Try to be someone that makes a better society. Being a good person is one way to make a legacy. Or, if you want to get into philanthropy as a longer-term part of your lifestyle, start your own foundation. Here’s a quick guide for how to start a charitable foundation.
7) Acknowledge Individual Issues
People make living trusts all the time. Every family has ‘stuff.’ Some of it is negative, such as prior divorces, siblings or children who fell out of favor, and meddling relatives. Some of it is positive, like adopting children or having one of your three children make it big in their business.
These sorts of complicating factors can make it harder to work through the details of how to allocate your inheritance or if in the future you want to do inheritance planning. This is another reason why having a team of impartial professionals is critical to maximizing the outcomes of your inheritance planning.
Remember – 70% of high net worth family wealth is gone by the second generation, and 90% by the third. Timely inheritance wealth management planning can save you (and your heirs) from a lifetime of heartache, regret, bitterness, and resentment. Take the time to get the people you trust in the room. Talk about your goals. Make your plans. And enjoy the fruits of what your inheritance makes possible.
See if Pillar Has the Right Wealth Manager for Your Team of Experts. Book a free consultation today.