3 Elements of Generational Wealth

“Generational wealth” has become a frequently used term. It usually refers to an aspiration — i.e., that the financial wealth in one generation of a family will be passed on to the next generation of the family.

An aspiration is a necessary starting point, but the goal of generational wealth also requires a plan consisting of 3 core elements:

  1. Wealth creation (or growth) plan. How will your family establish (or grow) its base of wealth? Will you focus on real estate, marketable securities, intellectual property, or does your family own and operate a business?
  2. Wealth protection plan. How will your family protect its wealth from risk of loss? Do you have adequate insurances in place? Is the family using corporations or LLCs to shield its assets from personal liability? Have you utilized appropriate tax strategies to minimize tax liability? Do you have long-term care plans for the family’s elders to avoid a spend-down?
  3. Wealth transfer plan. Do the adult generations have Wills and Trusts in place? Are documents in place to avoid probate where possible? Which family members are the “successors” that are intended to manage the family’s properties or businesses? Are they trained and prepared for these roles?

Every family’s approach to generational wealth will be different. A plan consisting of these 3 elements will help your family to do its best to foster generational wealth. Our firm will be honored to assist you and your family with each of these elements. Schedule a consultation with us to get started.

Power-of-Attorney vs. Joint Bank Accounts

Some of our elders feel that a power-of-attorney is not necessary, because they already have a joint bank account with one of their adult children.  Thus, if the elder becomes mentally incapacitated in the future (due to Alzheimer’s, dementia, stroke, etc.), then the adult child would still be able to pay the elder’s bills using the joint bank account.

Generally speaking, that’s true about paying bills. 

However, a joint bank account will not give the adult child legal authority to handle any of his or her elder’s legal affairs, such as:

  • Communicating on the phone with the elder’s financial institutions or health insurance providers
  • Signing legal documents such as pension affidavits or pooled Trust applications
  • Administering any accounts that are solely in the elder’s name

The power-of-attorney is one of the most essential documents in planning for the long-term care of our elders, and it is one of the most straightforward to complete.  It is very important to create a power-of-attorney before the need arises.  If your elder does not have a power-of-attorney, please contact our office to arrange one today.

Sibling Power

Who’s the most powerful group in America today?  Is it the Democrats?  The Republicans?  The 1%?  In my humble opinion, the most powerful group in America today are siblings in their 50s and 60s.

No matter their political slant or income level, siblings in their 50s and 60s are collectively responsible for some of the most important decisions that shape families and communities across New York and across the nation.

These decisions may include:

    • How to provide care for an elderly parent
    • Whether to sell a family home
    • Who will have power-of-attorney in the event of an elder’s mental decline
    • How to provide for the next generation through Wills, Trusts or Inter Vivos Gifts

    Of course, not everyone in this age bracket has a living parent, a child, or even a sibling.  But those who have even one of these living relatives will typically feel a level of responsibility for some important financial planning and decision-making.

    Some siblings have an easy time communicating about these topics, and others have a harder time.  Both scenarios are normal.  What’s important is that you seek input and counsel so that you (and your siblings) can make the most informed decisions possible.

    Long Division: Owners of heirs’ property beware

    This is a scenario that you and your family must be aware of, especially if you are the rightful owners of inherited property also known as “heirs’ property”…

    Your’re spending time with your siblings at the family property when the phone rings:

    “We’re interested in buying your property,” the caller says.

    One of your sisters is very interested. The other siblings have mixed feelings, so the family clearly needs to discuss the matter among themselves.

    However, that real estate investor is likely to call back again on another day. The investor might actually offer to buy your sister’s share of the property for a few thousand dollars. If she agrees and signs the paperwork, then that investor will become a co-owner of the property along with you and your other siblings. The title might actually appear as if the investor is the true owner of the entire property.

    When joint ownership of heirs’ property is divided in this way, it may result in long legal battles with complex issues. Some common claims and procedures in these situations include the following:

    • Constructive trust
    • Fraud
    • Partition
    • Equitable estoppel
    • RPAPL Article 15
    • Adverse Possession
    • Eviction
    • Probate
    • Administration

    Waiting too long to resolve these issues is not wise. Legal representation is advisable, and prompt action is the best approach to try and salvage the property or its fair market value.

    Litigation, Mediation or Conversation

    No one wants to feel played for the fool, especially not by a family member. But it is not uncommon for serious disputes to arise among family, especially when money and property are involved.

    When seeking legal counsel about an intra-family dispute, it is important to understand the following:

    1. You may have a valid legal claim, but litigation is usually NOT quick or inexpensive. Litigation may not be the best first course of action for your situation.
    2. In New York the civil courts require plaintiffs and defendants to make a good faith effort to settle or resolve issues within a case before it can go to trial. Therefore, settlement or informal mediation is an approach that some attorneys might take to try and resolve a case early on.
    3. In reality some intra-family disputes can be alleviated through conversation. It may not be easy, and it might not be instant, but in some situations it is possible to talk things through to a resolution.

    If you are at an impasse with your relative(s) regarding property, estate, or business, the Law Office of Isa Abdur-Rahman, PLLC, is available for an initial consultation about options for your situation.

    Trade Up or Trade Out

    New York real estate values continue to rise, and homeowners in New York recognize this fact.

    1. Some NY homeowners are using their equity to “trade up” from smaller homes to larger ones.
    2. Other NY homeowners are choosing to “trade out” to a different state where homes are even larger and prices are lower.

    So which option makes the most sense? Well, it really depends on the goals and needs that you and your family have. Some of the practical considerations that usually should be considered include:

    • Access to quality healthcare services and schools (if applicable)
    • Proximity to other family members
    • Reasonable commuting distance to your employment
    • Capital gains tax on the sale of your property
    • Effect of the sale on your estate planning
    • Effect of the sale on Medicaid planning
    • Whether it makes sense to keep the first property and also buy the next one

    A thorough assessment of these and other relevant factors can help you decide whether to trade up, trade out or stay put.

    Contracts for Collaborating

    Collaborating in business is based on trust. However, insisting on a written contract with a collaborator is not a sign of distrust. The contract serves several important purposes for your entrepreneurial venture or real estate investment, such as the following:

    1. Clarifies the financial terms of the collaboration (who contributes what, who gets what).
    2. Specifies the duties/obligations of each party (who does what).
    3. Manages expectations (what are the benchmarks, timelines and deadlines).

    Contracts for collaboration might take the form of a joint venture agreement, LLC operating agreement, independent contractor agreement or other forms. The more detail is included within your agreement, then the more clarity you and your partner(s) will have to execute the vision successfully.

    Deals on My D.E.S.C.

    The best time of year is when deals are active, but activity does not guarantee closing. To maximize closing potential, it is good to pay attention to what’s on your “d.e.s.c.” —

    1. Is your deal adequately Documented?
    2. Is the document that you’re using actually Enforceable? (i.e., in a court of law)
    3. Have you Secured that document in a way where the other party would have difficulty backing out of it?
    4. Are there superior Clouds on title that will weaken or negate the security position that you have?

    My D.E.S.C. approach applies to various types of transactions, such as real estate investment, wholesaling, and business acquisitions.

    Legacy Transactions

    More families are implementing “legacy transactions” to accomplish their quality-of-life objectives.   A legacy transaction is the sale or transfer of an asset to a younger member of the family, whether outright or in trust.

    A legacy transaction may be useful for a variety of purposes, including the following:

    • An older family member downsizing from a larger home to a smaller condo or co-op
    • A younger family member purchasing a first home
    • Leveraging a property to get cash for retirement using a forward mortgage instead of reverse mortgage
    • Transferring assets for Medicaid planning purposes

    Depending on the market conditions and the family’s objectives, “keeping it in the family” with a legacy transaction may be more advantageous than an institutional product or a brokered transaction.