The Common Sense Guide to Family Wealth Planning

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Everyone wants to leave their children a legacy of sorts when they pass on. It’s something to be remembered by, whether it’s a favorite tea set, a special hand-made blanket or a trinket that has been handed down from generations. Of course, the biggest legacy (although not the most important or sentimental) is money. With proper family wealth planning, you can leave your children a bounty of wealth that can last for generations. Maybe your kids can finally open their own restaurant and name it after you.

In fact, family wealth planning is important at all stages throughout your life, and should be thought about as early as possible; when you have a young family, and certainly before retirement. Here are a few things to keep in mind when starting your family wealth strategic plan…

The Common Sense Guide to Family Wealth Planning
The Common Sense Guide to Family Wealth Planning

Adopt a Budget

Make a list of your income and expenses. On the expense side, put ‘wealth planning’. Ideally, you should put at least 10 percent of your earnings into a savings account, but any amount is better than none. Your budget will change over the years, so redo this process on a regular basis so you’re putting as much money as possible away. When you get your pay, make sure this allotted money goes into a separate account right away (your bank can help you set this up). That way, you won’t even miss it, and you won’t be tempted to spend it.

Spend Your Money Wisely

Do you really need that set of golf clubs? Great sale on shoes? That doesn’t mean you need them. Of course, it’s nice to indulge once in a while, but don’t make it a habit. Look for sales on mandatory items, like groceries, and stock up then (this is a great idea for non-perishable items like toothpaste, paper towels, etc.). Eat out less, make your latte at home and spend within your means.

Invest Consistently

Investing your money means that you make your money work for you. Instead of putting your hard-earned cash into a bank account that earns little or no interest, an investment account will gain you compound interest over the years. A good strategy is to put money away into a savings account, and then when you reach a threshold amount – say, $1000, move it to your investment account.

There are several investment vehicles to choose from, including stocks, bonds, mutual funds and more. Do some research on what is available and choose an investment vehicle that you’re most comfortable with. It’s best if you can learn to diversify your investments; that way, when the market goes through a correction (and it will), your money will be safe.

Hire a Professional in Family Wealth Planning

If the thought of managing your investments makes you feel overwhelmed, don’t worry. Hiring a professional that you trust can help you gain an even better return on your money, and can help you get a better night’s sleep, knowing your money is working as hard as it can for you. You’re really going to have to do some research on this step, though. Ask family and friends for recommendations, and meet with several professionals from different companies before you commit.

With funeral costs ever on the rise, it makes sense to have these funds ready so your children don’t have to bear the brunt of the costs. Pre-planning your funeral may be something to think about, so your final wishes get carried out with ease.

( Photo by reynermedia )

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4 Responses to The Common Sense Guide to Family Wealth Planning

  1. I would add purchasing long term care insurance. Yes, it is expensive but not as expensive as having to pay for nursing home expenses out of pocket. And with likely cuts to Medicaid in the future, there is no guarantee that one can rely on the government to pay for nursing home care. Even assisted living is expensive and a long stay in either type of facility has the potential to wipe out a major portion of the family wealth.

  2. Hi Kathy – I’m glad you brought that up. I’ve been meaning to do some research on LTC insurance and maybe do an article. I’m in favor of it for all the reasons you give. But cost and the number of carriers who have pulled out of the marketplace is making me think otherwise. But again, I don’t know enough. I do know that when I was in accounting and doing tax returns a lot of well-to-do people do have LTC policies. I just wonder what the premiums look like when you’re in your 80s. And naturally if you never use it, it’s a lot of money gone that you’ll never be able to use or pass onto your children.

    I’ve often joked with my son that when I reach a point where I need care he should put me on an iceberg and push it south. I’ve heard that some eskimo tribes have that practice, but I’ve never been able to verify that. I’ve been to some nursing homes and it isn’t pretty.

  3. My mother purchased a policy at age 79 and it cost her between $6500-7000 annually for a policy with benefits at $150 per day for 6 years. My husband and I have policies through the group plan as federal gov’t retirees. Last year they had a complete rate overhaul and our premiums went up by over 50% Our policies pay $2975 per week for 5 years and our premiums are $388 per month for hubby and $340 per month for me. It does not have inflation coverage but it does have guaranteed future purchase option available every other year. Doing it that way was much cheaper than automatic inflation protection, however, if you reject a total of 2 future purchase offers, you no longer have the ability to increase coverage that way. When the rates went up last year, we definitely had to tweak our expenses so we could afford to keep the policies, but it was worth it to us, even though we uttered curses through gritted teeth. Hopefully when the time comes it will get us a cot with a blanket instead of a sleeping bag on the floor. But, like any other insurance it is one of those things that you really hope you never need.

  4. $728 per month for LTC insurance? And the premiums can go higher? I’m trying to imagine that on top of our $1875/mo health insurance premium, and my iceberg strategy is looking more attractive…

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