How to Protect Your Family’s Wealth

July 11, 2020 | Article

Family businesses and finances are struggling to adapt to new challenges brought on by the global pandemic. The world has experienced a greater disruption to the global economy in these past few months than many of us have experienced in our entire lifetimes. Millions have had to file for unemployment due to a contracted labor market, supply shortages are affecting many sectors of the economy, increased stock market volatility, and increased government spending are just a few of the specific challenges our country is facing today. It is more important than ever to have a logistical and financial plan to overcome these difficulties.

Follow these steps to protect your family’s business and wealth.

  • Build A Financial Team

It’s important to have a team dedicated to ensuring the well-being of your business and your wealth. Your team should include experts that can help you create a clear, concise plan so that you can obtain your financial, personal, and charitable objectives.

Here is a list of professionals you should consider recruiting to your financial team:

Financial Advisor  – A financial advisor is an essential part of your financial team in order to protect and grow your family’s wealth. A qualified financial advisor will review your overall financial picture and coordinate with the rest of your financial team to ensure your family’s finances are taken care of. Your financial advisor will also work with you to create a plan that will encompass all aspects of your financial affairs including investment planning, cash and debt management, retirement, risk management, tax minimization, and estate planning.

Tax Professional – A qualified tax professional or Certified Public Accountant will help you navigate complex tax laws, file your family’s business and personal tax returns, and provide in-depth tax consulting to help minimize the tax burden that will be due each year.

Estate-Planning Attorney – An attorney who is an expert in estate planning can help provide your family essential legal documents, such as a will and trust, and verify that everything is taken so that you are in control of where your assets go after your passing.

Insurance Specialist – An insurance specialist should work with your financial advisor to make sure that you and your family have considered all the outcomes of an unexpected event. This includes specific scenarios to protect your business. If you have existing insurance policies, the coverage and provisions should be reviewed every three to five years to ensure they are still performing as expected and can meet the intended objectives. It is important to do your research before purchasing any insurance to avoid being oversold on unnecessary products.

Estate planning is more than just tax planning.

  • Focus on Estate Planning

According to the 2020 Estate Planning and Wills Study, less than one-third of adult Americans have a will or estate planning document. The most prevalent reason respondents gave for not having a will or estate planning documents was “I haven’t gotten around to it.” This is problematic, especially since COVID-19 came seemingly out of nowhere. Estate planning is important for multi-millionaires and small business owners alike. The best time to start your estate plan is right now. This will allow your family to avoid a worst-case situation, such as a death of a family member or severe mental decline that can complicate an already difficult situation.

Here a few reasons why estate planning is so important:

  • Comprehensive estate planning will allow you to avoid probate court, which can cost as much as 5% of the value of the estate.
  • Estate planning with qualified professionals can lower the overall tax burden due on the estate.
  • An estate plan can help protect your assets from creditors.
  • Estate planning gives you and your family peace of mind that everything will be taken care of when there is a death in the family.

The Power of a Trust

  • Create a Cybersecurity Plan

It is vital that you protect both your personal and business data by preventing cybersecurity breaches and detecting and responding to breaches quickly. A cybersecurity breach can expose sensitive personal business information and disrupt operations.

  • Follow a Decision-Making Process

A vertical decision-making model has business and family wealth decisions coming from the top-down. In contrast, a horizontal model allows everyone at the table to have input in the decisions being made. By implementing a horizontal decision-making process, multiple generations can understand and participate in guiding the family business and family wealth.

  • Communication is Key

Protecting your family’s business and wealth is dependent on open communication. It is never too early to start talking to your children about money. The 2018 Young Adult Financial Literacy Survey conducted by Schwab found that young adults want to learn how to reach their financial goals, save money, budget, keep their information secure, and understand more about debt. Follow these steps to ensure that the next generation will be well-equipped to take care of the family business and wealth. 

  • Teach your children about saving and investing. The earlier they start, the better off they will be in the future.
  • Teach your children how to budget.
  • Teach your children about debt, including credit cards, student loans, and interest rates.
  • Teach your children about health insurance.

It is important to start talking to your children early so that they grow up prepared to manage their wealth. Set clear expectations about the role your wealth will play in their lives. Will you pay for their first car? Their insurance? Their college education? Will they receive an allowance? Will you divide their allowance into living expenses, investments, and charitable contributions? It is your job to ensure that you raise financially responsible children who can see the value of their wealth.

The biggest mistake you can make is procrastinating. Failing to have the proper teams, plans, and processes in place puts your family’s business and wealth at risk.

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