Why a recent family meeting was really awesome!!
Of course the names and locations are changed to protect the family’s privacy.
Part way through a family meeting, a son looked at his dad and said: “I get it! I get it! I understand what you have been saying all along! If we are good stewards and take care of what you and mom have created, and teach our kids to do the same thing, it (the family’s financial assets) will do the same thing for our kids and grand kids!
This young man then thanked his mom and dad for their sacrifice and for letting him be part of the process.
This statement was a very satisfying payday for me and a couple I work with as we had a family meeting recently. The patriarch (Jay) had asked me a few months earlier to help him discuss and guide the preparation of some trusts to receive a gift of stock in some family owned business enterprises owned by him and his wife (Sally) for the benefit of their children. He had spent some time with some other professionals and felt like he was getting nowhere and was actually confused by all the jargon. It all seemed to be very complicated and he asked me to help.
My first question to him was: “What is your purpose in doing this?” He told me it was to save tax (which is usually the first thing I hear)* and “because he wanted to start preparing his children to take over so he could step back a little.” He also wanted to make sure that a transition occurred as smoothly as possible if we “lost” him. Ultimately Jay and Sally wanted their family to be able to take over and to reduce strife when that happened.
It became apparent that, like in all families, there were concerns about the capability of their children and what the future held. I suggested that we spend some time identifying what the purpose of their wealth was. The WHY of what they were doing. I am grateful that they accepted this challenge because it produced some great beginnings in their quest to figure things out for their family.
As we went through our process, it emerged that Jay and Sally had built their lives on a strong foundation of honesty, hard work, generosity and integrity. They struggled however with divulging the extent of the wealth they had created with their children because they thought it would remove incentive to work and be productive human beings. Also, one of their children, who worked in the business, had been making some choices that would not ultimately lead to good outcomes if he were in charge, unless he made some course corrections.
Note: I have learned that talking about our choices is not as effective as talking about the why behind our choices. If the why is really understood and agreed upon by the family; meaningful progress can be made.
Talking about the WHY or the Purpose of a family’s wealth will go much further to change behavior than talking about the behavior. Behavior is a manifestation of choices spurred by beliefs and life experiences.
Our process:
In our process, we start by laying out the WHY according to the senior generation’s view of the world. Usually this ‘WHY’ has not been thought through sufficiently, written down and communicated. The next generation is often conflicted and unsure about what is coming and what is expected of them….or even what the possibilities are.
If the Purpose and ‘WHY’ of the senior generation can be articulated and formalized in the beginning, it can act as a foundation for family discussions to build on. It can also be a catalyst for unifying discussions.
The family’s purpose MUST then include the input ‘Why’ of the next generations, if it is to be meaningful and have impact on behavior and decisions that each generation makes going forward.
What does your estate return look like?
We also prepare a pro-forma estate settlement diagram that shows how the current family financial balance sheet flows through the estate settlement process based on today’s estate planning documents, so the senior generation and the next generations can see what happens when the estate transitions.
in the case of the family mentioned above, once we had the Wealth Purpose Statement and pro-forma estate settlement diagrams completed, we prepared for a family meeting to talk about the family’s wealth and to share Jay and Sally’s purpose (their WHY) with their family.
We had a family meeting. It was in this meeting when the ‘lights turned on” for the son that Jay and Sally are worried about.
The meeting opened up a very healthy dialog between Jay and Sally, their children and in-laws. It led to other discussions. The family has bought in and as more effective communication has been created and is ongoing, they have a higher probability of their transition being successful (and avoiding the shirtsleeves to shirtsleeves in three generations proverb). This is because what is being implemented has been created with consensual buy in among all family members. If the children have a voice, the family will end up with a better outcome because they (the children) helped design and build what they will be living with as they move ahead in their own lives.
Elevare (with the help of legal council) has helped to design and build trusts that will own stock, updated the couples estate plan and we are working with the family to create and implement the governing documents that outline how the trusts interact with the businesses. All this has been done in a way that Jay and Sally and their children have agreed will work best for them. We are now having continued discussions and the family is implementing strategies that will help prepare the family members to take on a greater role and ultimately take over and be successful with the family wealth and stewardship.
Final thought:
Your wealth will have impact on your family if you purposefully address it or not, so why not make the effort and have the conversations now, so it can have a positive impact later?
I have learned over the past 32 years that the next generation does not prepare heirs for transition simply by creating estate planning and documentation. Rather, preparation and ultimately successful transition of wealth occurs because of good communication and trust among family members, prepared heirs and because the family is united in their purpose. There has to be intentional and authentic discussions between all family members where everyone’s voice is heard and appreciated.
We look forward to helping you work towards a better outcome and in helping you avoid the shirt sleeves to shirt sleeves proverb in your family.
Warmly,
Scott Mathewson
Founder
Elevare
801-984-8175
www.Elevarellc.com
*Gifting assets into trusts can ultimately save estate tax if the value of what is gifted increases in value and can be a great way to move growth from an estate that is increasing in value. Jay and Sally wanted to keep the business in the family, so estate tax savings was a possibility here.
