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Multi-generational financial planning

Part of the planning process is to ensure the next generation is equipped to receive the wealth, appreciate its value and make smart investment choices.

Multi-generational financial planning, otherwise known as generational wealth planning, is on the rise. As the vast wealth of the baby-boomer generation passes into the hands of the next generations, the need for more open money dialogues between the generations increases.

What is multi-generational financial planning?

It aims to increase cross-generational financial communication so as to ensure the smooth transfer of wealth from one generation to the next. This next-generation engagement is designed to ensure that a family’s wealth is passed on efficiently, while at the same time protecting and respecting family relationships. The increased complexity and diversity of family structures has driven the need for transparent discourse between the generations to ensure that a person’s wealth can be bequeathed smoothly, equitably and legally to his/her appointed heirs, with well-managed expectations and no unpleasant surprises.

Why the need for multi-generational financial planning?

The failure of families to sustain their wealth past the third generation is well-documented, with 70% of families losing their wealth by the second generation, and 90% by the third generation. The desire for families to safely transfer their wealth to the next generation and beyond is but one of the factors leading to the rise of multi-generational financial planning. Poor financial education on the part of the next generation can lead them to take unnecessary investment risks, or to invest in low-risk investments which allow their wealth to be eroded by inflation. Part of the planning process is therefore to ensure that the next generation is equipped to receive the wealth, appreciate its value and make smart investment choices going forward.

Another factor worth considering is that more and more retirees are seeking ways to transfer wealth to their adult children during their lifetimes, as opposed to after their death. In addition, complex family structures that are fragmented globally have also increased the need for better communication between generations when it comes to wealth transference.

What does multi-generational financial planning entail?

Multi-generational financial planning is both broad and complex, and necessitates willing participation by all generations. The first step in the process involves appointing a qualified, impartial financial advisor who is experienced in wealth transference and estate planning. Their job will primarily be to facilitate discussions between you and the next generation(s), and to structure an estate plan that gives full expression to your wishes. Your advisor will be able to assist you with the following:

  • Implementing strategies to ensure that the family’s hard-earned wealth is protected, transferred and sustained in the most tax-efficient manner.
  • Finding the balance between providing for your retirement and providing a legacy for your loved ones. This will involve developing a detailed lifetime cashflow model to ensure that you don’t spend too much too soon. Depending on how much you have saved for your retirement years, your loved ones’ inheritances may need to be constrained or delayed to ensure that you don’t run out of capital while you are still alive.
  • Where appropriate, setting up trusts as a means of transferring wealth either during your lifetime or after your passing.
  • Developing a gifting plan to ensure that each heir or beneficiary understands your intentions and reasons, and respects them.
  • Making adequate provision in the case of a special needs child which could include setting up a special trust to provide for their future needs. It could also involve drafting a care plan which sets out how you would like your child cared for, and by whom, when you are no longer around. Read: Financial planning for children with special needs
  • Developing and communicating a plan with your loved ones in the event that you are incapacitated and/or unable to communicate. This could involve the drafting of a living will or advanced healthcare directive, signing a power of attorney, preparing a letter of wishes and/or letting your desire to be an organ donor known in advance.
  • In respect of business owners, planning could include the drafting of a business succession plan to ensure that your intentions regarding your business interests are made clear. A business succession plan is often supported by a buy and sell agreement which is underpinned by a business assurance policy, and can involve complex structuring.
  • Drafting of an ethical will to pass on family history, stories, ethics, religious beliefs, morals, values and information about the family that you want passed on to the next generation.
  • Explaining your retirement funding position to your adult children to alert them to any possible funding shortfalls in the future. Your adult children will appreciate being forewarned if they may be required to provide you with financial assistance in the future.
  • Structuring and communicating a plan should you wish to assist your adult children financially. According to a 2013 report from the Pew Research Centre, parents have become increasingly involved in providing financial support for their adult children, with 49% of adults over the age of 60 provide some form of financial support to their children. This can be a source of tension amongst siblings and is something that should be well-thought out and documented.
  • Communicating your desires in respect of your pets, including any arrangements you have made for them after your passing.
  • Sharing your thoughts and feelings on assets with sentimental value such as the family home or a holiday home.
  • Communicating your charitable and/or philanthropic goals with your loved ones, and instructing them on how you would like these goals to be carried forward.


How do you make it work for all generations?

  • Set goals as to what you hope to achieve from the discussions. Ensure that your financial advisor remains impartial and allows all family members to be heard.
  • Choose an impartial financial advisor with experience in estate planning. Make sure that all parties are happy to work with the advisor to achieve a common set of goals.
  • Commit to open and honest communication and ensure that all discussions are documented for future reference.
  • Be intentional and careful about who you appoint as executors, trustees and stewards of your wealth. After your passing, they will play important roles in ensuring that your wishes are honoured. Trust is an imperative.
  • Financial planning across multiple generations can have its challenges, as there may be deep-seated issues and emotional baggage. Hold your emotions in check and remain focused on your estate-planning goals.


Eric Jordaan

Crue Invest (Pty) Ltd

Do you have any questions you would like answered by registered financial planners?



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