Long-Term Estate Planning Requires Flexibility

One of the main challenges for families with wealth is planning for more than a single generation. With the uncertainty of the world, advances of technology, economic upheaval, and more many people are concerned about how to plan for decades or even a century down the line. However, there are ways to plan your estate that can provide for children, grandchildren, and subsequent generations as long as you are willing to plan with some level of flexibility.

Issues with Multigenerational Planning

“People, especially the first generation to have wealth, do have concerns about the future and they aren’t used to thinking in multigenerational terms.” Many legal and financial planners have found that it is difficult for people that have first generation wealth to think past giving to the next generation. This is because they first must adjust to managing that kind of wealth on their own before thinking about transferring it to their children, let alone passing it to subsequent generations.

In addition, it is impossible to know what the tax landscape or financial regulations will look like decades later, so making plans that far away gets even harder. That is why very few planners today recommend rigid estate planning tools like a pure dynasty trust, which has very little flexibility in its terms.

How to Long-Term Estate Plan

Allowing for flexibility in your estate plan can help you plan for future generations beyond your children and grandchildren. One of the most commonly used estate planning tools for this type of planning is the use of a multigenerational trust that is not too rigid and allows for flexibility in future generations. Multiple means of flexibility can be incorporated into a single planning tool. Power to modify the trust terms, flexibility in distribution, and other optional clauses can help a single trust last for generations.

Another option for multigenerational estate planning is the use of decanting, otherwise known as moving assets from an older trust into a new trust with updated terms. Decanting can only be done in certain circumstances, and the laws are different for the practice in every state. It is important to check with an estate planning attorney about whether this practice is legal and proper for your situation.

A third option for multigenerational planning is to give broad, discretionary powers to trustees. Giving broad powers to the trustee allows for them to make a wider range of decisions regarding the assets in the trust. In addition, giving beneficiaries the power of appointment allows for the beneficiaries to decide what is in their best interests at the time in addition to what will be in the best interest of the next generation. This can be beneficial because future generations will be able to spot potential problems with family members that you would be unable to account for now. For example, someone down the line might have a substance abuse problem, need emergency medical care, or have special needs that require more from the trust.

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