Archive for generational wealth

How to approach legacy assets in your estate planning

Legacy assets may not always be worth much, but it’s still important to handle them in the right way: by communicating with your family members about your wishes.

By Mark Hartnett, president, Argent Family Wealth Services

After a loved one passes away, surviving family members frequently find themselves squabbling not over money, but over personal items left behind.

In many cases, the value of these so-called “legacy” assets is more sentimental than monetary — a great-grandfather’s shotgun, for instance, or a mother’s engagement ring.

These assets may not be worth much, but it’s still important to handle them in the right way — by clearly specifying in your will who gets what. The key is to remain intentional with your planning.

The first and most important step is to communicate with your family members about your wishes. Ask for their feedback and collaborate as a group to ensure everyone is on the same page regarding the fate of your ‘67 Chevy. No matter how small the legacy asset, list it in your estate. Doing this now will go a long way to keep the peace and avoid potential sibling quarrels.

You may determine it best for some assets to be sold, such as those with high monetary value. But many legacy items are likely to be sentimental, which could make them worthwhile to pass along as keepsakes to a special niece or grandson. Have a plan for either avenue by mentioning everything (and everyone) by name. Consider the following checklist:

What percentage of value does it represent of your estate? The item may have great value to you both monetarily and personally, but it could be sold to benefit all surviving family members equally upon your death.

Are there future storage or maintenance costs to consider? It’s not uncommon to forget these details. If you own a classic car, for example, you should consider the cost of storing the vehicle, needed maintenance or regular specialty washes to protect its appearance. These add up over time.

Is there a rate of depreciation to consider, or is it increasing in value? Weigh the item’s past, present and future value. Everything is evaluated differently. Some items might be best to sell immediately or within a few years. Others may be worth significantly more if they’re kept in good shape for a couple of decades. Research these values and seek proper appraisal.

These are just a few things to consider. There are many other angles to keep in mind when it comes to different legacy assets, which is why you should consult with a wealth management advisor. Most importantly, be sure to keep everyone apprised of your plans and wishes for these treasured possessions so that your gifts remain gifts — not a potential burden or kindling for a dispute.


The 70/80/90 Metaphor

by Mark Hartnett, President, Argent Family Wealth ServicesHT Mark Hartnett

What is the significance of these three numbers?

The 70/80/90 Story is a statistical one that many financially successful fami- lies either don’t want to hear or have chosen to ignore. They tell a story of harm and suffering when the intention is usually the opposite. Let’s take a closer look:

70: The percentage of all generational transfers that fail (defined as, follow- ing the transition, the beneficiaries lose control of their wealth through foolish expenditures, bad investments, mismanagement, inattention, in- competence, family feuding or other causes within their control).

80: The percentage of trust beneficiaries that believe their trust is more of a burden than a blessing. 90: Of the generational financial transfers that are successful, 90% of assets are transferred into trusts by the third generation.

These numbers explain in great simplicity why the “shirtsleeves to shirtsleeves in three genera- tions” proverb is a reality for so many families. In other words: 1) most transfers fail; 2) of those financial transfers that are successful, almost all assets are transferred into trusts whereby; 3) the vast majority of beneficiaries are unsatisfied with their role as a beneficiary. So the answer to the question,“What comes next?” is usually… shirtsleeves for the third generation.

My first introduction to the 70/80/90 phenomena was early in my journey as a professional trustee. I was introduced to a third generation beneficiary who had recently dropped out of high school when she found out she was a beneficiary of her grandfather’s trust. She was “set for life” and didn’t need to waste her time getting an education. While $500,000 may have seemed like a lot of money to a bright-eyed teenager, neither my counsel nor her quickly decreasing trust ac- count balance convinced her to change her course and results of her foolish decisions.

So what do families who beat those odds do differently?

  • Recognize their assets are not only financial, but also human, intellectual, spiritual and social – the families also work very hard at being intentional in growing all forms;
  • Create a shared vision (their “why”) and mission (their “how”) for the family’s wealth;
  • Communicate on a consistent basis in both structured and non-structured settings;
  • Learn how to become mindful givers as well as receivers;
  • Create trust cultures that seek to grow excellent beneficiaries;
  • Tell and retell the family’s stories.

    As you can guess, this requires great effort for the families that seek to defeat the 70/80/90 Story. However, the families that are intentional and committed to the process are much more likely to be successful and leave a lasting legacy for generations to come. Let that be our guiding thoughts as we enter a new year in our lives.

    Roy Williams and Vic Preisser, Preparing Heirs (San Francisco: Robert D. Reed Publishers, 2003).
    Hartley Goldstone, James E. Hughes, Jr. and Keith Whitaker, Family Trusts (Hoboken: John Wiley & Sons, Inc, 2015)