Recently I had the pleasure to be in the presence of four generations of my family. Thankfully, we had gathered in celebration but the event inspired me to provide an update to an article I wrote about how the Racial Wealth Gap was affecting three generations of my family. You can read the initial article here. It seemed only right to celebrate Black History Month by writing about black women from different eras who continue to do their part to close the wealth divide. Here is how it is going for each generation since I last wrote about our experience and some things that might help you and your family avoid the same wealth gap pitfalls we’ve faced.
Generation #1
My grandmother grew up in the South and spent the majority of her time with her grandmother, who farmed the land they lived on. Eventually, my grandmother moved away but the property remained in the family. Most Americans believe that there is no need to have a written plan to pass down property. I can see evidence of this because according to Caring.com despite the pandemic 67% of adults still don’t have a Will. I guess people believe property transfers will automatically happen. The reality is, it rarely if ever does.
My grandmother tells me all the time that she tried to get her mother and aunts to do their estate planning and set up a clear plan for the property to remain in the family (her mother and aunts were heirs to the property at the time through inheriting it when their mother passed away). But her mother and others refused. They thought clearing the title was too expensive and figured it would eventually become my grandmother’s property anyway.
Hearing that story from her reminded me that I’m not the first person in my family who focused on generational wealth at a young age. My grandmother had the foresight to know that not having a plan means that you are in essence planning to fail. She was right. Eventually, she did inherit the property BUT so did at least 70 other distantly related individuals.
How does this happen?
Well, when you die owning property but don’t have a will or a trust, in some states that property becomes “Heirs Property,” especially when your family doesn’t do the necessary paperwork to update the property title to show a clear chain of ownership. What makes this situation even more confusing is it’s possible your family can still live on the property and even pay property taxes believing they own the property but still not have a clear “owner.” Every time an heir passes away the title gets more and more convoluted.
Here is an extremely simplified visual example of how this can happen:
Who are Heirs?
Heirs can be anyone related to the deceased property owner by blood or marriage or named in a will and alive when the property owner dies.
Imagine inheriting property and having to figure out all the heirs who may have a claim to the property in the last 109 years with very little information about your distant relatives (who they married, if they had a will, how many kids they had). In my grandmother’s case I’m told some heirs had 18 children, some had spouses, some passed away and may have had a will that left their interest to someone outside of the bloodline.
It’s easy to see how there could be over 70 heirs attached to this property and without legal paperwork, the title is unclear and “unmarketable.” Even if the property owner had a valid will, the heir still must take the original will to court in order to obtain clear title (that's what the daughter in the chart above should have done). Would you want to buy this property with no clear indication of who legally owns it? No. Estate planning takes action and education not just from you but your family has to understand the plan and know what to do when the time comes.
So, despite paying taxes on this land for decades and having to take this process on by herself when all of the heirs will benefit from her efforts, and no one wants to split the legal fees my grandmother didn’t let this stop her. She was motivated to do the right thing and clear up the title to the property not because of any monetary value the land might have but because she wanted to see the property remain in the family for generations and stop the generational curse.
From her I have learned that generational wealth truly requires selfless acts. I am pleased to say that there was a partial victory. A portion of the title to the land has been officially cleared, but of course, this is just the beginning before everything is truly free and clear.
Here’s how you can learn from our family situation and protect your assets if you own real estate:
Create a family tree, this will help you see how many living heirs you potentially have at this point in time.
Work with an attorney to create a valid estate plan so that your property goes to those who you want to have it.
Allocate money to be used to pay property taxes or a mortgage in your plan. Some often use insurance policy payouts for this. Consult a financial advisor for help.
Talk about estate planning and your plan with your family.
Generation #2
My mother has always been a saver by nature. She came from humble beginnings and never truly imagined she would make it to where she is today. A retired educator and now I can proudly call her a talented investor. Believe me, we have come a long way. Initially sat down a few years ago with my mom to have a conversation about her financial goals. It was clear to me she needed to add investing into her plans but she being the saver that she is wanted to save her way to wealth. Therefore, my mom went into investing in the stock market kicking and screaming. However, because my approach to anything difficult is always education in order to build confidence and self-sufficiency with my help and occasional accountability check-ins, my mother is investing in the stock market regularly and no longer needs anyone's help. She is confident in the assets she invests in and frequently I hear her sharing her story with those close to her.
I’m proud of my mother because she was initially very skeptical about the idea of putting her money anywhere other than in a checking/saving account, a Certificate of Deposit (CD), real estate, or an annuity. Now she has added two brokerage accounts (one for her and one for her grandchild) and a Trust. Her portfolios are still amazing and somehow outperforming mine. Occasionally, I even hear her say she wants to keep diversifying her assets and is open to new investments. So much so she has even started researching cryptocurrencies. I think she has caught the investing bug but she is always smart about it because she starts with education as her foundation. She puts in the work to learn and understand an investment instead of rushing blindly to put money in. My prayer is that she takes the time to be present in the moment and be proud of what she has built because it is impressive that she has truly gone from nothing to something and education is what helped her get there.
Here’s how you can learn from our family situation and grow your assets:
Set your Financial goals
Create a financial plan with an advisor or by yourself.
Research the best accounts options based on your goals.
Automate the transfer of funds you have allocated for investing so you have one less thing to think about.
Set calendar reminders to review your investments or to meet with your advisor
Remember to use your beneficiary designations for any accounts you set up (you are estate planning when you do this).
Generation #3
Like I said in my last article, I’ve had to get very creative and be intentional to come up with a strategy to break my generational curses. Because remember closing the wealth gap is all about not going deeper into debt, increasing your pay, having the capital to start a business, being an owner, and having a high enough net worth so that you can retire. According to the National Urban League, the Covid-19 pandemic has had a disproportionately devastating impact on minority and women-owned entrepreneurs in general, and the implications for Black-owned business owners have been even more devastating. In 2020 Black business ownership rates dropped over 40%, the largest of any racial group. The pandemic has exposed and compounded long-standing inequalities that make it harder for Black-owned businesses to endure the crisis and access recovery resources.
After 2021 threw me a devastating curveball, I sat down and created a new financial plan. My plan helped me see that I needed to use all the assets and resources available to me. While I love to educate my community on all things financial I realized that I needed to embrace my legal background. I now have two incorporated businesses, a teaching position, and the goal of being totally debt-free (yes, I even want to be free of the “good debt” and don’t want my businesses to take on debt). This is a break in tradition in itself because I don’t know anyone in my family that owns a home mortgage-free or a profitable business without debt.
Being in business for myself is the biggest generational shift I am making. The last entrepreneur in my family was likely my great-great-grandmother (the farmer that I mentioned my grandmother lived with). I am building my businesses without loans and taking the time to be intentional and grow at a pace I’m sure most entrepreneurs would think is too slow but I am doing so in hopes of building businesses that could be around and still making a difference in the lives of others long after I am gone.
Here’s how you can learn from our family situation and grow your assets:
Write down your income, expenses, and debts to get a big picture of your current situation.
Forgive yourself, no matter how bad it feels to be in the position you are in as long as you want to do better, you will. Let it go.
Make sure your emergency fund is prepared for the worst-case scenario (loss of income, major accident, unexpected expense).
Consider other ways you can generate income (hobbies, business)
Don’t be afraid to ask for help, it’s one of the bravest things you can do.
Generation #4
Another way I am able to start breaking generational curses is by saving for my child at an early age and allowing her to be on the path she truly wants to be on. This means I’m not strictly saving for her education, I am saving for her future. Whatever she decides that entails. A business, coding academy, blockchain technology company, improv classes, whatever she needs she will have the resources and the freedom to explore without feeling like she has to meet anyone else’s expectations.
I’m also excited to have financial conversations with her since the majority of my financial planning clients tell me they learned about money from their parents, but not because their parents sat down and talked to them. Instead, from the stress finances had on their life or watching their parents spending habits. Regardless of her age, I have informative transparent conversations with my daughter about money, where it comes from, how hard it can be to make money, how fast it goes so that she is prepared when it is her turn to work and make sure all the bills are paid. No surprises here, she will be ready.
Here’s how you can learn from our family situation and grow your assets:
Have open and honest conversations with your family and kids about money
Consider diversifying the assets you invest in for your children. For example cash, stocks, whole life insurance, real estate, cryptocurrency, collectibles.
Based on your financial goals, open accounts for children as early as possible, even if you start with $5, and continue contributing you will be surprised what they will have in 18 years.
What I’ve learned from each of these stories is that generational wealth is multifaceted. Money is what gets all the attention but knowledge is truly what’s most important. Knowledge of family recipes passed down from generation to generation may inspire a family member to create an award-winning restaurant. Property that was passed down from generation to generation may offer relatives a sense of pride in their legacy and an income stream. Truly creating generational wealth takes time, more than some of us might have to give, but if we start now and speak up about what we are doing we might be lucky enough to convince someone else this is a worthy enough cause to continue in our absence.
Jala Eaton known as Your Wealth Bestfriend® is a seasoned personal finance writer as well as an Attorney and award-winning Certified Trust & Fiduciary Advisor (CTFA). When she is not running her businesses, teaching, or writing she enjoys dance parties in the kitchen with her daughter. Her work has appeared on, Business Insider, Parents, Real Simple, The Skimm, Yahoo News, and others.
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