Planning For A Secure Future

Avoiding the “third generation curse” when estate planning

On Behalf of | Apr 15, 2024 | Estate Administration & Probate, Estate Planning

California is the home to many thousands of wealthy individuals, and most of them will pass along some portion of their estates to relatives or other beneficiaries. One of the concerns when doing so is the so-called “third generation curse,” the idea that many families will spend their fortunes by the third generation after it was earned.

If you’re planning your estate and wish to minimize the chances of this happening to your beneficiaries, there are a few strategies at your disposal.

Communication is key

A high percentage of wealthy individuals create estate plans prior to their passing. But a surprisingly high number of them don’t adequately communicate their plans or wishes with their beneficiaries.

Often, they don’t want the knowledge of how the estate will be distributed to affect relationships. But by leaving your beneficiaries in the dark, you could create confusion.

Enacting your plan

Creating a plan might involve a trust or other fiduciary arrangement and could require a trustee or intermediary to help oversee your estate. Preparing that person ahead of time could set them up for success.

Once the plan is in place, make sure your beneficiaries understand the plan as it relates to them. They don’t need to know everything, especially all at once. You can inform them of your plans and wishes in steps and confine the information shared to what directly impacts them.

If you’re planning your estate, you’ll want to make sure that your beneficiaries live comfortable and secure lives, avoiding the “third generation curse.” The key to doing so centers on creating an estate plan and then making sure your beneficiaries understand the strategy behind it and how to prudently manage their wealth.