Protect your family wealth for generations to come

Head of Wealth Management at Momentum Consult, Sonja Steyn provides some advice on how one should approach proper family wealth planning

If one had to identify a silver lining brought on by the pandemic, it would be the renewed focus we all have on protecting our families, be it physically or financially. We have come face-to-face with our mortality and we need to figure out the best way to plan for our future financial success, while ensuring a legacy for our loved ones.

According to Head of Wealth Management at Momentum Consult, Sonja Steyn, the handling of family wealth planning is critical in building what is dubbed ‘generational wealth’. Generational wealth refers to assets that are carried over from one generation to the next, typically appreciating in value over time.

“You’ve worked hard to accumulate your wealth. You owe it to yourself and your loved ones to plan ahead for the distribution of your assets when you pass away. It’s a significant step in securing the financial future of the people that matter in your life,” says Steyn.

Family wealth planning is more than just drafting a will and earmarking an inheritance. It is about setting up your family for the future. It is an educational process as much as it is a financial management one.

Having worked with many clients over the years, Steyn has learned a thing or two about the art of family wealth planning.

Here are her tips to keep your family’s financial legacy strong:

Have a family wealth briefing

“The first step to any family planning exercise is always to get everyone in the same room and agree on a way forward,” says Steyn. “You need your whole family to feel included in the larger wealth picture.”

For Steyn, this includes setting up mutually agreeable goals, the long-term plan, and how the family wealth is going to be managed going forward.

“Everybody needs to get on the same page,” advises Steyn. “This means you need to understand that different generations have different plans and find ways to bridge that gap as far as possible.”

When it comes to bridging generational gaps, Steyn says this means educating everyone on important financial concepts such as compound interest and debt. Clear investment goals and outcomes for all wealth needs have to be established and reviewed on a regular basis to ensure that investment philosophies are followed, and the outcomes are aligned with the family’s legacy plan.

Develop family governance

Steyn says there is a tremendous need to develop certain ground rules for family wealth, especially as that wealth increases. This will help you and your family put in the control and management mechanism to maintain its integrity.

“It all starts with governance,” says Steyn. “You need to figure out who is in charge and then clarify everyone’s role so everyone is comfortable with the decision making process from there on out.”

Once control is established, then the process can be outlined. “The course of action will determine how decisions are made and communicated. Here you can outline exactly what to expect so there are few surprises.”

From there, planning for future events and how your family will transition through these events is key, says Steyn. “Think about all future scenarios. What happens with future taxes? What about estate planning? What happens when a family member passes away? How does the money flow to the next generation and beyond? These are all considerations that will be different for every family, so think deep.”

Consider a trust

If control is an issue, Steyn recommends looking into setting up a trust to ensure that the family’s generational wealth is in the right hands and will benefit your entire family through generations.

“A trust is a good way to preserve your legacy and is especially beneficial in the event of liquidation, sequestration or divorce – which are quite prevalent in these times,” says Steyn.

By setting up a trust, your assets are under the strict control of an appointed board of trustees, who can then act in your place for your family and all beneficiaries in the event of your passing.

Steyn explains, “This is especially important if you have young children or family members who are simply unable to manage their inheritance. Alternatively, you set up an inter-vivos or living trust, which is created while an individual is still alive. You can get a peek into how certain family members might handle an inheritance by distributing small pots of money to children and grandchildren over time, and then make up your mind from there.”

It’s all about communication and the right advice

In the end, Steyn says good communication is the fundamental key to all family wealth planning. “If you don’t talk to each other and work together as a united front, your plans are destined to go awry. Families that are connected to the wealth management process and demonstrate strong communication will experience an easier transition when the unforeseen and inevitable finally arrives,” says Steyn.

If you are still unsure about the family wealth planning process, Steyn advises speaking to a professional financial adviser, as this is sometimes the only way to wrap one’s mind around the ever-changing and ever-complicated world of wealth management.

“It is important to ensure that your financial adviser is one that is qualified to handle the complexities of your financial world. Once you find that person, and feel in good hands, you should take comfort that your family’s wealth will be protected for many generations to come,” concludes Steyn.

ENDS