No one over age 18 today will live to see the end of the 21st Century. The inheritance you leave your children is reflected in the values they have learned from you about the role of money and property. Here are ways to plan for the future that give your heirs a perspective on their Inheritance that extends far beyond the dollar value of what you pass on to them.
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Values-Based Wealth Planning ... continued from above
Between the years 1980 and 2030 it is estimated that the largest transfer of
wealth from one generation to the next in the world’s history will take place
when approximately $41 Trillion dollars is transferred at death from the
‘greatest generation’ (those born between 1910 and 1935) and the ‘Baby Boom’
generation (born between 1945 and 1965) to their children and grandchildren.
hat’s a lot of commas and zeros. This article examines the implications for your
planning that affects the generation that are today’s teens and young to
mid-life adults.
WILL YOUR 'CORE VALUES' BE TRANSFERRED?
Studies of people who have inherited wealth they did not earn have shown that
it can either be the boom or bane of their existence, depending on the ‘Core
Values’ which they inherited from their parents. If the values and example
passed down are positive character values, it is likely to be reflected in the
lives of the children as adults and parents themselves. If not, you can
understand why in some families many grandchildren don’t remember much about
their grandparents or what they stood for.
One study shows the last thing parents want their children to spend an
inheritance on is a new car, yet in Orange County, California heirs wait an
average of only 21 days after receiving an inheritance before buying a new
vehicle. Moreover, where inherited wealth buys depreciating assets rather than
those which appreciate in value, inherited wealth is depleted by the end of the
second generation in just over 80% of the cases studied and is gone entirely by
the third generation.
This is a condition known as ‘Affluenza’ (the wasting of wealth). But adults
who as children earned their allowance with household chores or had part-time
jobs growing up to pay for their own bikes, clothes, cars or college tended to
invest their inheritance into retirement savings, mutual funds, business
start-ups, home equity and income-producing real estate. What does this tell us?
"DADDY - WHERE DO 'CORE VALUES' COME FROM?"
The ‘Greatest Generation’ literally ‘saved the world’ by their sacrifices in
World War II and Korea. After the war, they built careers and new businesses,
having children and building homes in unprecedented numbers. Their humility and
appreciation for the non-economic values in life is reflected in the classic
‘Americana’ paintings of Norman Rockwell. Their children are today’s ‘baby
boomers’ who grew up in the 40’s, 50’s and 60’s and fought totalitarianism in
the Cold War, Vietnam and Desert Storm but had years to experiment and ‘find
themselves’ since they didn’t face the financial struggles their parents did.
THE MOST COMMON MISCONCEPTION.
Every parent wants their children to have it ‘better’ than they did, and this
is reflected in the examples they live and the values they teach – or fail to
teach – their children and grandchildren. However, many planners buy into the
myth that business estate, retirement or financial planning is only about
transferring ‘the money’ rather than the quality of life and core values.
Instead of starting with what they want their children and grandchildren to
stand for and accomplish, many bypass these issues entirely and focus instead on
fortune rather than family. As a result, estate planning, retirement and
financial planning become focused on trust documents, notarized signatures,
coverage amounts and funding rather than how these useful tools implement the
vision and goals of the parents.
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HOW TO MAKE YOUR PLANNING 'COUNT'.
As a long-time practicing attorney in the fields of estate planning, risk
mitigation, wealth management and asset protection, I’ve seen clients (and the
professionals who should have served them better) in a rush to put their pens to
paper rather than first discussing the client’s priorities and values. Here is a
protocol for a more favorable outcome:
• Start with a thinking-and-valuing exercise that amounts to a quiet personal
assessment of ‘what really matters’. Honestly consider the example and the
values passed down to your children and what kind of steward you have been of
what you have earned and invested so far. Write down the core values, dreams and
objectives that you want to matter in the lives of your children – and yes, your
grandchildren. The end result should be your own personal ‘Values and Vision
Statement’. It should reflect what you and your children as adults will be known
to stand for.
• Next, is an exercise I like to call ‘I Suddenly Died Today and Didn’t Get
to Say Goodbye’. Though it may be uncomfortable, take about 30 minutes to jot
down what would actually take place over the next two years following your
sudden death today versus what you hope or guess or think might happen. This is
often a real ‘eye-opener’ if you own a business, have investments, are paying
for a home, have debts, children or plans for the future. Most believe we will
die in our old age, at home in bed, without pain, still looking good, surrounded
by our adoring family and with all our bills paid and our dreams attained.
These two steps can be done in either order. They are best done in private,
but always in a relaxed setting, perhaps even in a ‘family retreat’ in a resort
setting if you wish to include your children in writing a family Values and
Vision Statement. With these steps complete, professional planners can do their
best work.
As a planner, I always enjoy having a ‘context’ in which to help clients
reduce their business and investment risks, strengthen their financial and asset
protection and plan their estate for themselves, their children, their
grandchildren and their favorite charities. For example, I enjoy it when family
multi-generation trusts contain ‘incentives’ for the children or grandchildren
to achieve educational goals, business ownership, contribute to science or the
arts, participate in community improvement and church life. The incentives may
be in the form of matching funds for investments or retirement savings the
children or grandchildren so that they are encouraged to be productive.
Updating your estate and financial planning, reviewing your insurance and
retirement planning, forming a family limited partnership for liability
protection and to pursue investment and business goals, forming an estate
planning trust, holding investments and business enterprises in limited
liability companies and securing the financial outcomes you hope for are all
important steps. But they should always be based on a solid foundation of
ensuring your ‘core values’ are reflected in the planning and documents you
sign.
ABOUT THE AUTHOR: Michael Potter, Esq. is a familiar face to many business
owners and investors. His practice is focused on Tax-Advantaged Wealth
Accumulation, Accelerated Retirement Planning, Asset Protection, Business and
Estate Planning, and core-values based Multi-Generation Legacy Planning.
Disclaimer:
The information contained above has been provided as a general
service. Any references to specific financial, legal, accounting, or
taxation issues are done so in the context of general information
and should not be relied upon as fact or construed as advice by the
us in any of these areas. You should consult a relevant financial,
legal, tax or accounting professional to assist in your particular
circumstance. |
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Insurance Policy: Broadly, the entire written contract of insurance. More narrowly, the basic written or printed document, as distinguished from the forms and endorsements added thereto.
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