The Multigenerational Wealth Management Guide

Managing and growing wealth across generations requires thoughtful planning. Families often, and understandably, focus planning on allocating assets and financial inheritances.

Yet, there is a growing focus on the “softer issues,” including family values and charitable giving. This approach goes beyond setting aside assets for future spending, focusing instead on instilling a thoughtful perspective on money’s role and purpose across generations, reflective of the family’s core values.

Here’s a crash course on multigenerational wealth management, addressing common strategies, challenges, and important considerations.

Strategies

First and foremost, we ground our planning strategies in careful financial analysis, seeking to balance the needs of future generations with those of the individuals who originally amassed the wealth. It’s crucial to avoid over-gifting so the current generation can still enjoy their wealth while simultaneously planning for the future.

There are two key types of effective estate planning for family wealth transfer: annual exclusion gifting, a yearly opportunity capped at $19,000 per recipient in 2026, and lifetime exemption gifting, currently $15 million per person, which individuals can use to transfer wealth during life, or at death. While annual gifts offer a straightforward way to transfer wealth, their “use-it-or-lose-it” nature encourages timely action. Setting up trusts can help these gifts benefit recipients while providing flexibility and allowing controlled distributions over time.

Irrevocable dynasty trusts also stand out for their ability to recognize and support heirs across several generations through leveraged gifts and use of lifetime gift exemptions. When contributing to these trusts, the donor’s basis in a gifted asset carries over to the trust. This makes high basis assets, like cash, potentially advantageous assets to transfer into the trust, depending on a family’s specific tax and estate planning objectives, preserving some future long-term capital gains taxes in addition to the future estate taxes saved.

Common Challenges

One common challenge in wealth transfer is the donor’s apprehension about losing access to their gifted assets. In order to realize estate tax savings or income tax advantages for beneficiaries, donors must make this leap. This process involves a delicate balance. Advisors can help clients understand the financial strategy behind the asset transfer not as a loss, but as proactive planning for their future and the future of their beneficiaries. The goal is to find a comfortable middle ground where the benefits of tax savings outweigh the real and perceived loss of control and access.

Another hurdle involves clients’ concerns over the potential impact of substantial wealth on their beneficiaries’ lifestyle. To address this, trust provisions include specific language that guides asset distributions, ensuring they aid beneficiaries’ health, education, maintenance, and support, or HEMS, without encouraging dependency. The HEMS standard helps maintain a sense of normalcy and responsibility, ensuring wealth serves as a tool for support and growth, rather than funding personal indulgences. As an example, if a beneficiary was driving a modest car before the creation of the trust, the trust benefits would not suddenly elevate their standard to a Ferrari.

Important Considerations

Tax laws are inherently temporary and subject to change, which often leads to hesitation among clients who are wary of future reforms. However, implementing strategies now based on current tax laws can help position families to take advantage of currently available planning opportunities, some of which may continue to provide benefits even if tax laws or code provisions change. Starting early with gifting strategies, similar to investing, may allow certain planning benefits to accumulate over time.

A final, often overlooked point is including beneficiaries in wealth management conversations early. Transparent discussions with the family and their advisor help instill a sense of responsibility and understanding of wealth’s purpose according to the creators’ wishes.

Effective multigenerational wealth management combines strategic financial planning with family values and philanthropy. This approach helps families preserve, manage, and transfer wealth across generations while helping future generations understand its purpose and use it in ways that reflect the family’s priorities for years to come.

Contact a Savant advisor if you wish to begin conversations about multigenerational wealth management.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.