3 tips for sustaining and building your wealth




By

Rob Elliott

The gravest threat preventing a family from passing along its wealth from one generation to the next is poor planning and management. Here are three practices that will help you sustain and grow family wealth for generations:

•

Foster effective family education and communication.

Many families have suffered from an inability to develop an agreed-upon mission and governance system for the family's wealth, which can result in disaster, in terms of both the family relationships and the finances. That kind of agreement from the beginning is important in order to avoid litigation and disastrous breakups.

•

Develop a rational spending policy that accounts for market downturns, taxes and inflation.

Lack of adherence to an appropriate spending policy can erode wealth either quickly, or over time in ways that are almost imperceptible. Most advisers would suggest a maximum annual spending rate of 4% to 5% of investable assets, given historic returns, taxes, fees and inflation.

•

Encourage an entrepreneurial spirit in younger family members.

Creating more wealth can mitigate the issues one might have with preserving wealth. Senior-generation entrepreneurs need to find ways to develop the next generation's skills by mentoring younger family members, providing financial assistance and projecting a positive attitude about risk taking.

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