Three Ways to Start a Family Wealth Tradition This Holiday Season

By Andrea McKinney, MBA, CFP® – Senior Vice President & Wealth Management Advisor

The holiday season is a time for family gatherings, celebration, and traditions. But it can also be an ideal opportunity to start or strengthen a family legacy. Beyond the exchange of material gifts, creating a legacy is about establishing traditions that convey family values and set a foundation for future financial security. With the right steps, you can ensure that your family wealth and values are passed down for generations to come.

1. Establish a Family Trust Fund

One of the most effective ways to secure a financial legacy is through a family trust fund. Trusts allow you to protect and manage assets, ensuring they’re distributed according to your wishes while minimizing estate taxes and protecting assets from creditors.

Benefits:

• • • Financial Control and Protection: Trusts allow you to decide how and when assets are distributed. This can be particularly helpful if you want to ensure younger family members receive funds at certain ages or for specific purposes, such as education or home-buying.
    • Tax Advantages: Certain types of trusts can help reduce estate taxes and keep family wealth intact for future generations.
    • Asset Preservation: Trusts offer a degree of protection from lawsuits, divorce settlements, and other financial challenges that heirs may face, making them an ideal vehicle for sustaining wealth.

How to Start: Setting up a family trust involves working with an estate planning attorney to determine the best structure for your family’s needs, whether a revocable trust, irrevocable trust, or a generation-skipping trust. During the holidays, discuss the benefits with your family and clarify the goals for the trust to ensure everyone understands its purpose and benefits.

2. Create a Family Foundation

If philanthropy is an important value in your family, creating a family foundation can be a powerful way to give back while also reinforcing a legacy of shared purpose. Family foundations allow you to fund causes your family cares about while fostering a sense of collective mission and responsibility.

Benefits:

• • Tax Efficiency: Donations to a foundation are generally tax-deductible, and assets in the foundation can grow tax-free, providing both philanthropic and tax benefits.
  • Shared Values and Purpose: A family foundation encourages family members to work together toward shared charitable goals, building bonds across generations.
  • Educational Opportunities for Younger Generations: Managing a foundation can help younger family members learn about budgeting, investing, and the impact of charitable work.

How to Start: A foundation can be started with a modest amount of capital and can grow over time. If a formal foundation seems too ambitious, consider a donor-advised fund (DAF) as an alternative; it allows you to set aside funds for charitable giving and involve family members in the distribution of grants to chosen charities. Hold a family meeting over the holidays to discuss philanthropic goals, and if there’s consensus, take the first steps to start a foundation or DAF as a family project.

3. Initiate a Holiday Tradition of Charitable Giving

For families seeking to establish a legacy of generosity, consider creating a holiday tradition of giving back. This could involve making contributions to charity, volunteering together, or setting up a family giving fund to support causes you all care about.

Benefits:

• • Strengthens Family Bonds: Working together on a common cause can bring family members closer and strengthen connections across generations.
  • Instills Values in Younger Generations: Charitable giving and volunteer work teach young family members the value of generosity and social responsibility.
  • Long-Term Impact: Annual giving provides an opportunity to create a sustained, positive impact on the community.

How to Start: Discuss as a family which causes are most meaningful, then allocate a portion of holiday spending to donate to a chosen charity or start a donor-advised fund. You could even turn charitable giving into a fun family event by choosing a different charity each year.

The holidays offer a perfect setting to think about the future and start a family wealth tradition that will leave a lasting legacy. Whether through trust funds, a family foundation, or shared charitable goals, these efforts help build a foundation for generational wealth and unity. Starting a legacy-focused holiday tradition now can deepen family bonds, instill shared values, and create a sense of purpose that extends well beyond the holiday season.