If you’re like many of the multi-generational families we work with, you want your wealth, the family business, real estate, decades of hard work, to actually reach the people you care about. But family conflict, tax exposure, and sheer complexity make that harder than it should be. So, if you find yourself asking “Where do I even begin?”, you’re not alone.
Research on affluent families found that roughly 70% lose their wealth by the second generation, and 90% by the third. The surprising part: studies attribute most of that failure, some estimates as high as 60%, to communication breakdowns within the family, not bad tax planning. Taxes matter, but they’re rarely why legacies actually fail.
But there’s a pattern among the ones who don’t lose it: they start with a shared vision before getting into the mechanics. These three steps, with the right team of advisors, can help you build that blueprint.
Create Your Legacy Plan Blueprint in 3 steps
This simple process can take the confusion and overwhelm out of creating your estate plan. Along the way, expect to face tough decisions and ask hard questions, which is exactly why the right team matters. Your financial advising, legal, and tax professionals should possess real expertise, and the ability to work together so you can make clear, confident decisions.
Need a good team? Reach out and we can help you build one!
Step 1: Start with an end goal.
Your legacy blueprint (or estate plan) is simply intended to arrange your assets to make the impact you want for the future. So, what do you want? Clarify your intentions for your family and the charities you care about. This vision should guide every strategy that follows.
Once you have big picture goals, use this framework. What percentage of what’s left when you pass away do you want to go to:
- Family ______%
- Charity ______%
- Taxes ______%
Start with your vision for the outcome, not with minimizing taxes. Reducing taxes is important but we’ve heard from many family who started by trying to save as much tax as possible, got deep down in a strategic plan, then suddenly realized that they’ve been so focused on what they don’t want (losing money to taxes) that they don’t have a clear vision for what they do want. You’ll save yourself a great deal of time, money, and stress by starting with a vision for your ideal outcome.
Will taxes erode the legacy you intend for your loved ones?
Step 2: Evaluate and Choose Legacy Plan Strategies.
Estate tax strategies can be complex. There is a seemingly endless list of trusts, tax shelters, legal documents, each with a confusing acronym. This is why the right team is so important. They can help you simply understand, evaluate, and choose the best strategies to bring your legacy vision to life.
- Start with how much income you need to enjoy life. You’ll use this to determine which assets and income you will keep in your estate or at least need some access to. See How Much You Need to Retire for more. This will help you define which assets can move out of your estate to help save taxes and fulfill your legacy plan.
- Look for opportunities to discount your assets. You can use certain estate tax strategies to shrink the estate tax value of assets such as business and real estate, reducing the amount your family would lose to taxes.
- Freeze the value of your estate. Anything over $15 million ($30 million for married couples) is subject to up to 40% estate taxes. Once you have applied relevant discounts, you can “freeze” that valuation by moving assets out of your estate into certain kinds of trusts This means any future growth on these assets takes place outside your estate rather than passing the asset later at a higher value.
- Create liquidity for taxes. Tax-free tools like life insurance designed for estate transfer can create instant cash to cover taxes, so your family isn’t forced to sell a business or real estate to pay the bill. Because the death benefit is generally tax-free, this often increases the total amount that reaches your family or charity.
Step 3: Communicate Your Legacy Plan to Your Family.
With your plan finished, it’s time to tell the people most affected by your plan. This can be done in a family meeting and can even be facilitated by your financial team. This often includes:
- The long-term legacy vision
- Goals for specific assets, like funding education or supporting a charity
- Family governance responsibilities
- What beneficiaries and trustees need to understand about their roles
For more, read How to Have an Estate Planning Talk With Your Family.
Crafting your legacy doesn’t have to be full of complexity and worry. Our team here at Alterra is here to help you create a path towards family harmony and financial alignment. This planning takes time to be done right, the time to get started is now. Scheduling a conversation with our team is a great place to start!
Grant Monson
CFP®, CLU®, ChFC®
Partner, Financial Advisor
About the Author
Grant grew up on a working wheat farm in eastern Washington. Today, he credits his family – who still manage the farm – for preparing him to build a business serving others. His vision to lead Alterra is built on relentless dedication to the success of his clients and the team – his extended family.
Grant’s dad says that he hasn’t worked a day in his life because “it isn’t work when you love what you are doing.” When combined with his mom’s view that “helping others should be part of every day”, Grant’s view of financial planning comes into focus. Alterra Advisors is very much a reflection of Monson family values.
Grant earned a bachelor’s degree in business and a master’s in economics at Washington State University. He launched his own financial advising practice over a decade ago, an entrepreneurial quest has become one of the most impactful things in Grant’s life. He loves coordinating the complex financial lives of business owners, bringing a depth of understanding that is rooted in his family’s own experience.
The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.
