Estate Planning – USA

 
  • Preparing Heirs by Bill High

    Preparing Heirs by Bill High     What is it about our kids that prompt such great emotion – from elation to depression? Certainly, there is no greater joy than to see our children flourish and no greater agony than to see them wander from our values and our beliefs.   Irony: neglecting the “soft” side   The greatest irony in family estate planning: spending countless hours on the “hard” side of assets while giving lip service to the “soft” side of people development.    The tendency in estate planning is to prepare legal documents that transfer financial wealth without preparing our children for true legacy. What does preparing our children for true legacy mean?   Preparing children for true legacy   Life is often a blur in the child-raising years. In the same timeframe that we are raising kids, we are building our careers. And frankly, some of us tend to do a better job of building financial wealth than “family wealth.” Much of what our children learn is left to chance: whatever they observe along the way.   When things finally settle down a bit, the children are graduated, off to college, or even absorbed with starting their own careers and families.    What is family wealth?   In his book, Family Wealth, James Hughes discusses the importance of human capital that includes the following outcomes – ideally for all family members:   They are thriving They have a strong sense of purpose, passion, and calling They have a strong sense of work ethic and character qualities like integrity, honesty, and compassion They have interpersonal relationships both within the family and externally They understand that life does not revolve around them but that instead they are part of a greater whole, a greater cause They have spiritual grounding They are generous.   These are big ideas, which go way beyond transferring financial capital. They go to transferring intellectual capital, social capital, emotional capital, and spiritual capital as well.   Good relationships require intentionality   It’s time spent with children with intentionality – making sure they understand our story and that we understand theirs. It is time spent repairing relational damage that is unintentional but inevitable. It is making sure they are healthy, thriving, and feeling fulfilled.    Giving together creates unity   One of the best tools I’ve found to bring families together is giving together. Structurally, that may take the form of creating a foundation or a donor advised fund. But practically, it simply means doing some giving together.   Giving is the great equalizer. Suffice it to say that giving prompts conversations that everyone can participate in regardless of age or experience.   Investing in legacy   So what do you want when you think about your heirs – great joy or great agony? It will take great effort to achieve the former. It must go beyond estate documents. Estate documents are a part, but they really should be guided with the influence of all forms of capital – […]

     
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  • Understanding and Valuing Perspective by Tom Conway

      How does estate planning disconnect couples? Certainly there may be many issues where a husband and wife are on the same page. They may be happy with their marriage, with their current lifestyle, with the common friends they have, but when it comes to making an important decision within estate planning, they are not in alignment. Let’s look at some of the possible reasons for misalignment.   Different Assumptions related to Upbringing   Different family backgrounds influence the way people see life. Those who grow up in wealth are likely to see an expensive lifestyle as normal. Naturally, they would expect the same for their children. Many beliefs and attitudes grow out of early life experience.   Differing Values   Your values are the things that you believe are important in the way you live and work. They play a significant part in the the way you view life, generally determining your priorities. Whether you recognize them or not, they are there, and they are the measures you use to tell if your life is turning out the way you want it to.   Although it is challenging to examine how your emotions intersect with your thinking, this level of self-awareness is necessary to identify the values that motivate you. Once you recognize and acknowledge your values, you can make plans and decisions that honour them. Understanding each other’s values can easily help a couple come to agreement on decisions.   Differing Perspectives   Our perspective – the viewpoint we bring to any consideration – influences our perceptions. You have probably heard the expression, “Perception is reality.” We are satisfied that the way we see it is the way it is, and we are unwilling to entertain the thought that our view is distorted or incomplete.    Lack of understanding leads to loss of communication   When spouses don’t agree on certain topics, they often avoid the subject. This false peace can lead to devastating consequences in the future.   Pride   All of us deal with an internal nature that wants our own way.  We often feel that our way is the best and that if everyone would just do as we say, or believe as we believe, the world would be a much better place. This pride can cause us to become defensive when we are challenged. It can also lead to a closed mind.   The opposite of pride is humility. To be humble means to be willing to listen to thoughts and opinions of others with an open mind. It means being willing to submit your own ideas to the scrutiny of others. So many conflicts in life can be resolved if two people approach the issue with a listening ear and an attitude of humility.   So how can a couple resolve the issue of goal incongruity? Often they cannot do this alone. Their differences often bring on heated discussions that lead to anger, hurt feelings, shutting down by one spouse, and pain. An impartial […]

     
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  • The Family Compass by Jerry Nuerge

    The Family Compass by Jerry Nuerge     Families often lack a compass for navigating through potential distractions. Most high net worth people believe that if they have signed all their trust documents and wills, they have taken care of their future. After all, their attorneys and CPAs have assured them that the maximum amount of financial assets will be transferred to their spouse and then to their children with as little loss to the tax man as possible. Unfortunately, research shows that only ten percent of financial assets make it to the fourth generation.   A family’s values are just as important as those of a corporation, but they receive far less attention. I have found it more beneficial to families to focus on three often ignored components that have the potential to extend a legacy indefinitely:   1) What are your values?   2) What virtues will we pursue?   3) What do we want our family story to be?   Collectively, these are family brand equity, the core of a family’s culture. The values define the family, the virtues build the family, and the story describes the family.     VALUES Rather than elevate whatever human values are currently in vogue in our culture, we identify our family’s values based on the evidence of our calendar and pocketbook.      VIRTUES Virtues are frequently underestimated in importance. Aristotle argued that substantial happiness and human flourishing could be grasped only through the virtues. King Solomon stated it this way: “My son, do not forget my teaching, but keep my commands in your heart, for they will prolong your life many years and bring you peace and prosperity. Let love and faithfulness never leave you.” (Proverbs 3:1-3)   The battle of morality is not so much about knowing what is right as it is doing what is right.      STORY The family story is a crucial component. Think of the family story as an ongoing stream of past, present, and future stories of family members woven together. These stories, infused with the family’s values and virtues, provide a sense of identity as well as motivation to not be the generation that weakens the heritage.     Imagine the priceless joy when family brand equity is the focal point of our transfers to the next generation! These assets empower families to live intentionally productive lives for multiple generations.       To learn more about the Center for Family Conversations and the new book, Unheritage, click here.         WHY YOU SHOULD LISTEN TO JERRY?     Jerry Nuerge is founder and owner of the Financial Independence Group. He is also the creator of the Wealth Integration and Transfer System™, the Generation Connection Process™, as well as the Revenue Retrieval System™. Jerry holds a BBA and MBA degree, holds the Chartered Advisor in Philanthropy (CAP), is a Chartered Life Underwriter (CLU), a Chartered Financial Consultant (ChFC), a Certified Family Wealth Counselor (CFWC), and a Registered Investment Advisor (RIA). He […]

     
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  • The New EBITDA: Emotions Before Interest Taxes and Depreciation

    The New EBITDA: Emotions Before Interest Taxes and Depreciation by Tom Deans, Ph.D.     Sitting in the departure lounge at LAX, I couldn’t help but overhear a conversation between an investment banker and his younger associate. I learned two things. First (and most business travelers can relate), it is amazing how cavalier people are about discussing confidential details in public places. The second confirmed something I had been thinking about family businesses for some time.   The older of the two bankers was whining about how he thought the slam-dunk deal they had just presented was now probably never going to happen. On and on he grumbled about the time he had spent running the numbers, lining up partners and generally bringing the deal to a crescendo, only to have the business owner change his mind about selling.   The investment banker was completely perplexed about why the offer, the numbers, the multiples that looked so good weren’t enough to entice the owner to do the deal of a lifetime.   It took everything I had to stop myself from leaping into the conversation and selling him a copy of Every Family’s Business (it wouldn’t have been the first time). But I exercised extraordinary restraint and settled back and listened to him talk about the clever structure of the deal, the tax that could have been saved and the instant wealth the owner would have secured if only he had been smart enough to take the deal.   Emotions are Squishy – Not the Stuff of Deal-Makers in Suits   The funny thing about listening in on a conversation is that the longer you listen the harder it is enter the conversation. So I bit my tongue and instead simply wondered how many other business brokers, M&A professionals and investment bankers expend such effort trying to bring deals to fruition only to have sellers back out. I wondered how an entire industry of intermediaries could so badly underestimate the emotional connection that owners have to their businesses, and also fail to understand how these emotions can scupper so much good work and extraordinary planning and lead the owner to ultimately destroy the business’s value.   When really bright finance experts hear the word “emotions” you can so often see their eyes roll back and the calculators shut off. Yet students of the greatest financiers of all time – deal-makers like Warren Buffett – know that these people get deals done by running the numbers and then engaging business owners in the one corner of their life where most number crunchers don’t go – their family. It is the rare rainmaker who has both the left and right brain firing on all cylinders.   Warren Buffett Buffett and other great deal-makers know that the sale of a business will typically result in a “liquidity event” that will leave owners with more wealth than they feel comfortable consuming. Most business owners accumulate wealth precisely by denying themselves consumption. Sellers will often kill deals, blaming a low bid price, […]

     
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  • Why Do Family Business Owners Often Die at their Desk? by Tom Deans, Ph.D.

    Why Do Family Business Owners Often Die at their Desk? by Tom Deans, Ph.D.   I was speaking to a friend who owns a successful manufacturing business and asked him when he plans to sell his business”. His response echoed something that I’m hearing more and more from business owners in my audience. “I can’t afford to sell – if I sell and take the proceeds and invest in this market, I couldn’t replace half my current salary”.   Of course the danger with this logic is that if unforeseen risk visits the business and it fails, my friend will neither have his salary nor the equity that he’s accumulated in the business over the past 20 years.   Misaligned financial interests of family members   But here’s the real problem. My friend, like so many, has other shareholders, namely other family shareholders who aren’t working in the business who want the sale proceeds now! His family dinners can best be described as a food fight waiting to happen. What to do?   What we do know is that doing nothing is a plan. Do nothing long enough and we know that a business owner will die at his desk. But where does the stock in the company go? Will it go to his or hers estate, to minority shareholders?   What usually unfolds is chaos especially when family is often left out of the planning loop. Financial advisors are doing a much better job these days of getting business owners to play the “what if” game. In fact there is a brand new breed of advisor brandishing a tough to acquire professional designation known as the Certified Business Exit Consultant — CBEC. I delivered a keynote to a recent convention of CBECs in Boston and they’re a rather impressive group of professionals committed to exit planning excellence.   The best advisors never stop reminding clients about the risks of business ownership   Asset allocation has forever been the first principal of sound investing. As investors near retirement, advisors constantly rebalance portfolios away from equity to income. The business owner who allows their high salary to cloud their thinking about the dangers to their equity in their business don’t need to travel Las Vegas to gamble – they’re already there!! Extraordinary advisors will keep this risk in focus for their business owner clients and work on divestiture strategies and timelines that meet the financial needs of both business owners today, their retirement tomorrow and the needs of surviving family.   Savvy advisors remind business owners that the sale process seldom unfolds quickly and even after the sale of a business, the new owners may either insist or welcome the seller to continue working and drawing a salary. It took our family 5 years to find the right buyer for our business and another 4 years to receive the full sale proceeds – that’s almost a decade from start to finish. Business owners in their 50’s, 60’s and 70’s often completely […]

     
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  • Connecting with successful children is key to legacy planning

    Connecting with successful children is key to legacy planning   Vice President of Advisor Development, Doug Orton and Senior Managing Director of Global Retail Marketing, William Finnegan provide tips on how to identify the alpha child and why making this connection is important. Discover useful tactics that can be turned into actionable steps towards sustaining your business. 

     
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  • A Family Wired For Perpetual Dependence by Tom Deans

    A Family Wired For Perpetual Dependence by Tom Deans, Ph.D.     When the sale of a family business is all about a founder becoming wealthy and their children losing their jobs, you can see why so few ever put themselves in play and sell.   The CEO – the Chief Emotional Officer (Mom, and increasingly Dad) – just can’t stand to see the family pull itself apart. Killing the business with love has always felt like a better plan.   With a wave of aging business owners trying to figure out how they’ll fund their retirement, you can understand the temptation to simply throttle back on their day-to-day involvement and draw a salary while Junior runs the business until the final curtain falls.   Of course, as I’ve discussed in previous articles, with owners living longer, it’s improbable that Junior is going to hang around the business into his or her 70s, when Mom and Dad finally reach their 90s and hand over the reins of control – not operating control, I mean real control, control of the voting stock transferred when the last parent dies.   How About an Exit Where Everyone Makes Money?   But what if an advisor could frame the exit of the controlling shareholder as the day when all family members become wealthy? Far too often, death is the triggering event for the transfer of stock. Few children are offered an opportunity to risk their capital to buy the stock of their parents’ business at an early age. I recommend that when a child is 14, the parents and advisors begin the process of implanting the idea that the family business will be bought, not gifted, and that employment is different from ownership.   For a variety of reasons, the majority of parents signal that there’s no real or pressing need to recycle dollars in the family: “Hang around long enough, Junior, and all this will be yours – for free.”   Of course we know that nothing is ever really free and that while the ownership question is left hanging, there are as many underpaid children working in family businesses, as there are overpaid children. My experience on the speaking circuit is that few overpaid children ever risk their capital to buy out their parents. Why derail the gravy train? Parents who use their business to purchase and control family harmony do more harm than good and always pay the greatest price of all – a family wired for perpetual dependence.   Family Business Math   The dysfunction around the issue of compensation percolates and festers because the stakes have always been high. When Junior complains about low wages, some parents simply say, “If you don’t like what you’re paid, leave.” Emotionally and financially, it’s never been easy for a child to quit a parent’s business.   Child Quitting Over Compensation + Aging Business Owner = Less Inheritance For Junior.  You can see how family business math becomes really interesting when only one child working in […]

     
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  • Changing Conversations About Estate Planning

    Changing Conversations About Estate Planning   Changing estate planning conversations to focus on your values and goals can help establish what matters most to you and what you would like your legacy to be. 

     
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Center for Family Conversations

The Center for Family Conversations (CFC) is a resource center that provides the integral tools and ideas in helping families establish a 100-year-plus Family Legacy Plan.

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