Money Matters: Building Wealth Across Generations and Overcoming the Racial Wealth Gap

 America’s racial wealth gap is enormous and getting worse. One study warns that left unaddressed,median net worth of Black Americans will fall to zero by 2053. Portia Wood is on a mission to change this dire prediction. She and her mother, Robin Wood, are generational wealth planning attorneys. Their estate planning firm, Wood Legal Group, LLP, is passionately focused on teaching, Latinx and LGBTQ communities to protect, leverage and pass on their assets using the law of estates and trusts.

I had a chance to learn more in this interview.

Can you share a little bit about the implications of the study on Black and Brown median net worth?

Research by the Institute for Policy Studies and Prosperity Now found that it would take the average Black family 228 years to amass the amount of wealth enjoyed by the average White family today. They stated: “As mind-boggling as this statistic is, new evidence documenting actual wealth disparities between Black and Latino families and their White counterparts forces us to consider this multi-century wait as a best-case scenario.” In a follow-up report “The Road to Zero Wealth,” Prosperity Now predicted that the racial wealth divide will never close if the trends of the past 30 years continue, and that the continued growth in racial wealth inequality will hollow out the American middle class. 

What effect does generational wealth have on the wealth gap?

More than 40% of wealth in America is passed down through the generations, yet fewer than 3% of African Americans have effective multigenerational estate plans in place. As a result, roughly 26 million African Americans (70%) are poised to forfeit as much as 30% of their wealth at the time of death.

 

How can families make plans to help close the wealth gap by providing and planning for the next generation?

Estate planning is an extraordinarily powerful yet underutilized tool to help turn the tide on the wealth gap, and can protect your assets for the benefit of your loved ones. When you die without a will or an estate plan in place, your estate must be “probated” in the courts — and most times a will alone is insufficient to avoid probate. In the U.S., families lose approximately $2 billion annually in the probate process. Court fees, attorney fees, accounting fees, and other costs take a huge bite out of what could have been passed to future generations had proper planning been done.

 

A properly crafted estate plan can help families protect their assets and pass down more of their wealth to their children and grandchildren, and that can open up doors of opportunity. As little as $10,000 can be transformational in a person’s life. It could help your children pay off debt, start a business, address special needs, or make another meaningful investment in their future.

 

It's never too early to start working with an estate planning attorney and financial professionals to ensure that your wealth transfer desires are set down in black and white. Think about those who are most important to you — the ones you love and want to protect. Give some thought to how your wealth transfer near the end of your life mirrors your philosophy of how you live your life.

 

What are some common mistakes parents make that leave children at risk and how can they avoid them?

The five most common and costly mistakes parents make when it comes to protecting kids are:

 

1.  Letting courts decide who will raise their children. Parents who have not selected legal guardians for their children are leaving decisions to strangers in the court system.

2.  Assuming a plan is not necessary because their family will care for their children. Children can unintentionally end up in the wrong caregiver’s hands resulting in custody battles.

3.  Being unprepared for something catastrophic, like a serious accident or illness. When both parents are gone and no guardianship has been determined, Child Protective Services is often called until a Judge determines a place for the children.

4.  Being unprepared to pay for your children’s continued care, education and health needs.

5.  Winding up in a guardian selection nightmare.

 

So what can you do to protect your minor children? Completing your guardianship elections is a quick and easy thing you can do, starting with filling out a form designating short-term (emergency) guardianship and power of attorney. Choosing emergency and permanent guardians is a first step toward ensuring your children are properly cared for.

 

It’s equally important that you designate a permanent guardian. They do not have to live close by, and they do not have to get to your child quickly, but they will have authority over all decisions affecting your child until age 18.

 

Other crucial elements of estate planning for parents of minor children include:

 

Life insurance: Consider the amount of money you make in a year and multiply that by 15 or 20 years, depending on your child’s age. If you make $100,000 per year, you may need a $2 million policy.

 

Trusts: These can be set up to dole out money to your child as a way that protect the balance until they are old enough to responsibly manage it. A well-structured trust will ensure that your kid does not blow through all their money and can include financial incentives for good grades or other achievements. I can also set parameters for protecting your child’s inheritance and providing for someone else to manage it for the rest of their lives. We can also plan intergenerationally for grandkids and great grandkids.

 

Guardian’s journal: This is a detailed plan for how you want your child raised according to your values, family history, and life experience. It may include daily routines, religious beliefs and practices, as well as financial, legal, health care, and other important information and instructions.

 

None of us has control over when or how tragedy or death might strike. But we can take steps now to protect our loved ones. By doing comprehensive estate planning now, while you are alive and well, you are doing what you can to protect your kids, no matter what curveballs life might throw at you.

 

Portia M. Wood, Esq., is a generational wealth planning attorney. Based in Los Angeles, she leads Wood Legal Group, LLP, an African American woman-owned and operated law firm specializing in estate planning, probate, and elder law that she runs with her mother and law partner, Robin Wood. They are passionately focused on helping all families grow and protect wealth by being a trusted resource for accurate information and comprehensive, culturally competent estate planning. Learn more at woodlegalgroup.com.