Wealth Transfer – Planning for Success

Posted by on September 27, 2009 in Family Wealth, Financial Planning, Readings | 0 comments

Over the next 50 years, 50-100 trillion dollars will be transferred to successive generations. Approximately 80% of all transfers will fail by the 3rd generation.

According to a study in Williams and Preisser’s “Preparing Heirs” only 15% of estate / wealth transition failures were due to the what’s (i.e., legal and technical issues). The remaining 85% were result of the how’s (i.e., breakdowns of communication and trust, lack of family developed missions, and inadequate preparation of heirs). In fact, open communication and beneficiary preparation were the two factors that distinguished the successful 30% from the failed 70%.

Under the traditional estate planning paradigm, the primary considerations are tax minimization, asset protection, and probate avoidance. Estate documents are drafted in such a manner that if the first and the last pages were removed, no one could tell to whom they belong. Trust names most often reflect the tax purpose and the grantor’s surname. Yet none of these speak to the above determinants of success: communication and preparation.

And what about the family’s priceless intangibles: their human and intellectual assets? How are these planned for in traditional estate planning? Simple answer: They’re not.

Fortunately, there are other options.

One such option is the Purposeful TrustTM, created by John A. Warnick and Scott Farnsworth.

The following is from their How to Build a Purposeful Trust Practice brochure.

It Starts with a Purposeful Conversation™

Given an opportunity, most clients are interested in deeper conversations around the impact of their wealth on their children, grandchildren, and favorite causes. They want to discus the “How much is enough?” and “How much is too much?” questions. They want to know how to pass on more than money. They want their wealth to be a blessing to those they love and not a crip­pling handicap.

Purposeful Conversations provide a simple, enjoyable, and gratifying process for helping clients think deeply about the significant issues underlying their most important estate planning deci­sions. From their answers, we can discern the real purposes behind their planning and we can glean the words to express their purposes, hopes, and dreams to trustees and beneficiaries. The clients’ own words and stories are the best source for the name of the trust, for the lessons and wisdom that should inform trust decision, and for the bedrock principles that should guide the trust through uncharted waters. With their words and their stories in hand, we’re prepared to start creating Purposeful Trusts.

The Seven Secrets of Purposeful Trust Planning

We have discovered the seven keys that open the door to a beautiful and meaningful new world of planning for us and our clients.

Secret #1: Focus—The estate planning process is robust and engaging when it focuses primarily on the clients’ deepest hopes, dreams, and purposes.

Secret #2: Purpose—The trust itself is infused with life and energy when the clients’ own words are used to express the rich human purposes of the trust.

Secret # 3: Name—The clients’ name for the trust can be a succinct and powerful expression of their fondest hopes and dreams for the trust and its beneficiaries.

Secret #4: Guidance—Directions based on the clients’ wisdom and life-lessons and written in the clients’ own words can guide the trust to achieve its grandest purposes.

Secret #5: Heirlooms—When a gift of tangible personal property includes the cli­ents’ story and the item’s background, it turns an object into a priceless treasure.

Secret #6: Gratitude—Expressions of appreciation and an attitude of gratitude in givers and receivers can turn transfers into gifts and financial riches into true wealth.

Secret #7: Principles—Statements of the clients’ guiding bedrock principles can provide pole star and compass in navigating the trust through an unpredictable future.

How might you begin to capture The Purpose of your clients’ estate plans?

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