Generational Plan – We can define a generational plan as the process of ensuring you pass your wealth on to your family or future generation efficiently. So, they will be able to enjoy the maximum benefits from your wealth or estate.
Why Is a Generational Plan Prevalent at the Moment?
After knowing about generational meaning, you need to know why it is prevalent, especially at the moment. It is because the baby boom generation starts to pass on their wealth to their children & grandchildren.
Of course, we can connect it to the significant increases in recent prices of property. It means that baby boomers who got on the property ladder earlier will have substantial assets to pass on.
In addition, as the current pandemic of Coronavirus continues, many people start to think more about their mortality. Besides that, they start to think about who they want their hard-earned wealth to be passed to. Then, it makes generational planning more important.
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Why Is a Generational Plan Very Important?
Good generation planning makes a great difference to how much of your wealth will go to your beneficiaries. The most important thing is that inheritance tax legislation can mean significant benefits on how much money you can pass on.
A Typical Scenario of a Generational Plan
A typical scenario of a generational plan involves a married couple with many children reviewing their assets. It aims to see how they can pass their assets to their children & grandchildren efficiently.
In this typical generational plan scenario, you will need to protect half of a married couple’s family home for their beneficiaries. Besides that, it is very important to find other ways to maximize the amount of wealth you can pass on.
How Should You Structure Your Assets?
We know that each individual has different circumstances. So, we cannot take an approach to structure all people’s assets. It is important to create your will. Therefore, you can pass your assets to your beneficiaries in an efficient manner.
When you work with a financial advisor, it is normal to focus on your immediate family’s needs. As a baby boomer, you may look at a retirement plan, when to take Social Security, and how to invest your retirement assets.
There are also other topics of financial planning such as saving for home buying and your children’s education. In addition, long-term care & estate planning may also come up. However, there are some good reasons why financial planning should span the generations.
Sometimes, family members’ needs & interests overlap. Even if you have separated money, you still need a multi-generational product plan. We all know that grandparents want their grandchildren to continue school at colleges. And grandparents may involve their grandchildren in their care. Of course, healthy families will talk about it.
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Focuses on a Generational Plan
1. Your Business
If you have a business and want to keep it in the family, you need to talk to your financial advisor earlier about your succession plan. You can ask him/her what you & your family have to think about in preparation for the transfer of business ownership & control.
2. Your Work
If you are still working, you may have thought about when you will stop. When doing a generational plan, you probably consider deciding to stop working. If your money is tight, continued work can be a resource. You may also talk about younger family members’ career & goals.
3. Your Health
Do you have a family member with health issues that can cause a financial burden? If you do, you should talk to your advisor about insurance. In fact, there are many options for health insurance. You have to analyze them before choosing one.
4. Your Money
These life goals & issues come with a financial component. However, you will directly talk directly about your money here. It includes debt, cash flow, taxes, investments, and many more.
Both spouses should participate in the discussion equally. If one spouse is widowed & doesn’t know how to carry on, what about your children? Do they have money issues your financial advisor can help with?
5. Your Family
You can start with a general discussion about your family. Then, do you expect changes in a relationship status such as cohabitation, marriage, or divorce? Or, do you expect any changes in family compositions such as an adoption or a birth?
6. Your Goals
Besides your financial goals, you also need to think about your own family members & what they want to achieve. It can be a home, a business, a special vacation, etc. Even if you & your family keep your money separate, you may talk about it, too.
7. Your Retirement
A generational plan should also focus on your retirement. Is there any retirement account your former employer holds? If you have a business, can you benefit taxwise? In this case, you need to establish a new plan of retirement or contribute more to your plans.
8. Your Future
It covers anything we have not discussed yet in the previous topics. Does anyone need help to get financially organized? Can anyone get by for 6 months without dipping into retirement/other long-term accounts? Then, does anyone anticipate significant life changes in the next 5 years?
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How to Make a Generational Plan
You need legal documents to hold your assets. However, a generational plan will keep the money together. There are a few steps you need to follow for making it. So, make sure that you do these:
- You should have the right mindset
- You must be open with all members of your family
- You have to write your intentions
A Generational Plan to Keep Your Estate Assets Growing
If you think of money & growing wealth, you assume that an investment is the main driver behind the strategy. But, when it is about generational planning, a specially designed whole life insurance policy is the main catalyst to grow & protect the assets. Even more, it provides access to cash, too.
A generational plan is a new concept in financial planning. For your information, it recognizes that the financial & life decisions one generation often make have an impact on others.