With more and more Baby Boomers reaching the later stages of seniorhood, the media is abuzz over what’s being called “The Great Wealth Transfer.” This refers to the coming intergenerational transfer of wealth that will occur over the next few decades, as Boomers die and pass on their wealth to younger generations.

Because no one knows exactly how long Boomers will live or how much money they’ll spend before they pass away, it’s impossible to accurately predict how much wealth will be transferred. But studies suggest it’s somewhere between $30 and $50 trillion. Indeed, the coming wealth transfer is said to be the largest in history.

Most of the media coverage of this impending event focuses on how this transfer stands to benefit Generation X and Millennials, as well as its overall impact on the U.S. economy. But fewer are talking about its potential negative ramifications. And this is alarming because there’s plenty of evidence suggesting that most people are ill-prepared to handle such an inheritance.

For example, an Ohio State University study found that one third of people who received an inheritance had a negative savings within two years of getting the money. Another study by The Williams Group found that intergenerational wealth transfers often become a source of tension and dispute among family members, and 70% of such transfers fail by the time they reach the second generation.

The key to reducing the coming transfer’s potentially damaging effects to you and your children is to put a solid plan in place to counter its risks. In this case, it involves creating a comprehensive estate plan to ensure the wealth you pass on offers the maximum benefit and the fewest drawbacks for your loved ones. 

Given that your business is likely your most valuable asset, effective estate planning is even more important for business owners like yourself. While all aspects of estate planning are vital, as a business owner, creating a business succession plan is one of your plan’s most critical components. 

We can guide and support you in putting all of the necessary planning vehicles in place, including the creation and implementation of a detailed business succession plan. 

In addition to creating a comprehensive estate plan, there are a few other proactive measures you can take to help stave off the risks posed by the big wealth transfer. And many of them simply involve openly discussing your values and legacy with your loved ones to help make sure your planning strategies work exactly as you intended. Here’s what we suggest:

Create a plan: If you haven’t created your estate plan—and far too many of you haven’t—it’s essential to get started right away. Unfortunately, because business succession planning is a big-picture, long-term process, it’s easy to put it off, and lots of business owners never get around to handling this crucial planning task. 

Rather than procrastinating, succession planning should be a fundamental part of your business strategy from the start. Indeed, you must treat all aspects of estate planning like any other critical business project and invest the time, money, and energy to get it done right.

From there, be sure to regularly update your plan on an annual basis and immediately after major life events like marriage, births, deaths, inheritances, and divorce. We maintain a relationship with our clients long after your initial planning documents are signed, and our built-in systems and processes will ensure your plan is regularly reviewed and updated throughout your lifetime.

Discuss wealth with your family early and often: Don’t put off talking about wealth with your family until you’re in retirement or nearing death. Clearly communicate with your children and grandchildren what wealth means to you and how you’d like them to use the assets, including your business, they stand to inherit. Make such discussions a regular event, so you can address different aspects of money management, business ownership, and your family legacy as they grow and mature.

When discussing wealth with your family, focus on the values you want to instill, rather than how much they can expect to inherit. Let them know what values are most important to you, and try to mirror those values in your family life as much as possible. Whether it’s saving money, charitable giving, or serving the local community through business ownership, having your kids live your values while growing up is often the best way to ensure they carry them on once you’re gone.

Communicate your wealth’s purpose: Outside of clearly communicating your values, you should also discuss the specific purpose(s) you want your wealth to serve in your loved ones’ lives. You worked hard to build your family wealth, especially your business, so you’ve more than earned the right to stipulate how it gets used when you’re gone. Though you can create specific terms and conditions for your wealth’s future use in planning vehicles like your succession plan and a living trust, don’t make your loved ones wait until you’re dead to learn exactly what you want their inheritance used for.

If you want your wealth to be used to fund your childrens’ college education, provide the down payment on their first home, or invested for their retirement, tell them so. By the same token, you should openly discuss the vision and goals you have for the future of your business. In doing so, you can better prepare your kids to run your company and perhaps even determine which of them is best suited to take the helm.

By discussing the purposes you’d like your family wealth to serve while you’re still around, you can ensure your loved ones know exactly why you made the planning decisions you did. And doing so can greatly reduce future conflict and confusion about what your true wishes really are. 

Because estate planning, particularly business succession planning, can be a massively complex affair, it’s vital that you have a trusted advisor to assist you. This is where experienced family business lawyers like us come in. We can help you to create a comprehensive estate plan to ensure the company and wealth you’ve worked so hard to build will last for generations to come.

What’s more, every estate plan we create has built-in legacy planning services, which can greatly facilitate your ability to communicate your most treasured values, experiences, and hopes with the ones you’re leaving behind. By working with us, you can rest assured that the coming wealth transfer offers the maximum benefit for the people you love most. 

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.