Equity and Ownership – The Key to Generational Wealth (Part 3)
In the first two parts of this series, we identified what Equity is and what it does. We explored the long-term effects of ownership or lack of ownership and established that “owning things makes you rich”. In this final installment of our Generational Wealth series, we’ll dive deeper into the strategies for leveraging what we own to build a future that not only secures our financial well-being but also creates lasting wealth to pass down through generations.
The act of leaving behind property or assets, in itself, is a powerful tool for the next generation to build wealth. Inheriting a house allows the recipient to get a “step up” in basis. This means that the inheritor can avoid paying capital gains taxes on the appreciation that occurred during the original owner’s lifetime, basically preserving the home’s full value. Additionally, inheriting assets through certain Trusts can be an effective strategy to potentially reduce or even eliminate estate taxes. (If you haven’t read Leanne’s Estate Planning 101 post from last week, go read it! She covers the importance of “how one owns their property at death” which includes Trusts) By placing assets in a Trust, the wealth can be transferred outside of the taxable estate, potentially shielding a large portion of the inheritance from heavy taxation, thereby ensuring the long-term preservation and growth of wealth across generations.
Another powerful tool for building wealth through ownership is the Home Equity Line of Credit (HELOC). A HELOC allows you to leverage the equity in your home without having to sell the home or liquidate other assets. Practically, it allows you to borrow against the value of your property. You could then use that money to fund education, or even business opportunities. For example, you could use a HELOC to purchase additional real estate or pay for improvements on your current home that will raise its value. Like most lines of credit, as you pay down the balance of your HELOC, the available credit replenishes. This strategy not only unlocks immediate capital but also helps solidify your family's long-term financial security.
Similarly, a family-owned business can be a source of wealth that appreciates as it grows. As the business does well, its value increases. Its success can be leveraged to secure loans or attract investors. In either case, the profits generated can be reinvested into the business, real estate, or other financial opportunities to create a legacy that can be passed down to future generations.
In conclusion, building generational wealth through equity and ownership is a strategy that, when done thoughtfully, can create financial security for future generations. By strategically managing ownership, families can ensure that the wealth they build today continues for generations to come.
If you take anything away from this series let it be this:
1. Equity represents the theoretical cash you’d have in your pocket if you sold the asset today, after settling any remaining loans. It’s a snapshot of your ownership, in real dollars.
2. Ownership is the foundation on which entire families and communities build long-term financial stability. There’s a powerful compounding effect that ownership or lack thereof has on building generational wealth.
3. The practical strategies around leveraging ownership like a Home Equity Line of Credit (HELOC) or the use of a Trust can allow for the long-term preservation and growth of wealth across generations.
Consumer Financial Protection Bureau. (2022). Home Equity Lines of Credit - Borrowing from the value of your home. CFPB. Retrieved 2025, from chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://files.consumerfinance.gov/f/documents/cfpb_heloc-brochure_print.pdf.
Kenton, W. (2025, February 1). Step-up in basis: Definition and how it works for inherited property. Investopedia. https://www.investopedia.com/terms/s/stepupinbasis.asp
