family mission statements; preparing heirs for inheritance

What is Trust?Your Estate Plan is in Place…

But is Your Family Prepared?

Largest wealth transfer in history has begun

Boston College, “Study on Wealth & Philanthropy”, Paul Schervish, Barclay’s Wealth, Volume 3, 2007

$41 trillion transfer

of intergenerationa

lwealth

Over 120,000 estates

transition each year

valued at over $1 million

41 Trillion Dollar Wealth Transfer

Professional and Family Reports

of Wealth Transfer Outcomes

• “70% do not survive the second generation.”

Sloan Management Review

• “only 1/3 of businesses successfully make the transition.” The Economist

• “30% transition success in heir families.”

The Williams Group

A Challenge in Any Language

“Shirtsleeves to shirtsleeves in three generations”

is how Americans describe the high failure rate of wealth transfers – a phenomenon noted in many

cultures.

• Brazil “Pai rico, fiho nobre, neto pobre”: − Rich father, noble son, poor grandson

• China “Fu bu guo san dai”: − Wealth never survives three generations

• Italy “Dalle stalle alle stelle alle stalle”: − From the stables to the stars and back to the stables

65% “Too much emphasis on material things”55% “Naïve about the value of money”52% “Spend beyond their means”50% “Initiative could be ruined by affluence”49% “Won’t do as well financially”42% “Hard time taking financial responsibility

U.S. Trust Survey of Affluent Americans,

XIX

Parents Worry Primarily About the

Impact of Money on Their Children

Family dynamics play a much greater role

in successful estate transfers than previously understood

Step 1 – Awareness of the Challenges Historically, the vast majority of families lose their assets and

family unityfollowing the transition of their estate.

Step 2 – Assessment of MY Family’s Opportunities

Utilize the tools newly available to evaluate YOUR readiness to transition.

Step 3 – Actions that MY Family Can TakeAddress issues of trust and communication among family members, identify roles of the heirs, prepare a Family Wealth Mission Statement, and document a post-transition estate strategy.

Today’s Objectives

AwarenessWhat are the Challenges Faced by ALL

Families?

Three Major Challenges Stem from Family Dynamics

Based on field research with families by The Williams Group

1.Trust and communication issues within the

family

2.Beneficiaries being unprepared for the

wealth

3.Lack of family consensus on a wealth plan

Education… motivation…

declaring a mission objective

all at once

This may be “traditional”, but it is not

effective

Strengthen the Foundationof “Traditional” Estate

Planning

Est

ate

Pla

nn

ing

Inve

stm

ent

Man

age

me

nt

Ta

x P

lan

nin

g

Ph

ilant

hro

pic

Pla

nn

ingThe Traditional

Pillars of

Estate Planning

…Now You Can Help Prepare Your Heirs

for Assets. Trust & CommunicationRoles for HeirsFamily Mission

AssessmentStarting the Conversation…

What are the Opportunities for Your Family?

• Have potential roles been defined?

• Do heirs know about their opportunities?

• Have heirs had a chance to “practice” in those roles?

Opportunity to Prepare Heirs

• Are mentors assigned to help prepare them for their roles?

ActionsWhat Actions Can MY Family Take

Now?

Why Not Begin by Calling

a Family Meeting?

Communication holds families together

• They promote communication and trust building among family “team” members

• Provides a forum for family members to contribute to and share in support of the family missions

• Discussing “giving” teaches values & financial responsibility to heirs

• Family values become clarified

• A sense of “Teamwork” emerges

Why Families Meetings Workto Keep Families Together

• Achieve financial family education• Develop a family wealth mission statement• Define roles for heirs• Establish a family philanthropy

The Most Productive Family MeetingsUsually …

6

Philanthropy − A Hidden Pathway to Heir Success?

Family Giving is an Easy First Topic

• Start hard work with small steps

• Giving lets one “test the waters”

• Provides first forum for learning how to work together

• Microcosm of future requirement to make decisions in a structured way

Giving is fun!

Philanthropy causes donor heirs to reflect on

Family Values:

Philanthropy Reinforces

Family Values

•Are our family values reflected throughout the donee organization?

•Do those values guide their long-term plans?

What is a Family Mission Statement?

• Represents common values and agreement on purpose and direction for family wealth

• Provides guidance to all estate advisors

• Saves time, costs and misunderstandings

• Avoids post-transition litigation

• Enables the family to see progress or lack of progress towards their mission

What is a Family Wealth Mission

Statement?

“We are committed to family bonding,

community outreach and fun. We grow the

family assets and provide for the family’s

education, growth and security.”

Actual Family Mission Statement

•Set aside a time to meet the family’s professional advisors

•Develop financial education for all family members

•Review investment policies•Involve heirs in charitable/philanthropic

giving•Foster development of further philanthropic

capacities

Examples of Actions a Family Can

Take Now

What is Trust?

Thank You!