Strategic Inheritance Legacy Lounge forum "open for business"

I will confess: I've been dragging my feet. Not sure why. But I had to overcome the hurdle.

I have finally "turned on" the Strategic Inheritance Legacy Lounge forum and invite you to join what I hope will soon be a freewheeling and inspirational discussion of all things related to passing on a heritage from one generation to another.

Join us, won't you?

Thanks!

Legacy Planning Process, Part I

Several weeks ago, our investment advisor urged Sarita and me to seriously consider hiring a Legacy Planner. (Note the difference between legacy planning and "mere" estate planning. I described some of the philosophical and practical differences back in November.)

Greg Smith, the gentleman whom our advisor recommended, presented a couple of graphics that I think give further insight into some of the differences.

Here I will present only the "Legacy Planning Pyramid" (© 2006 Resonate Companies, Inc. and GDI Consulting USA, Inc.; used by permission):

[Click on the image to see it full size.]

According to Greg, "traditional" financial and estate planning comprise the first two layers of the Legacy Planning Pyramid. He defined financial planning as making appropriate decisions concerning investing; life, disability and long-term care insurance; basic retirement and tax planning, etc. And traditional estate planning: the preparation of proper documents: wills, powers of attorney, trusts, foundations, and so forth.

Proper legacy planning, Greg said, adds a legacy strategy (including statements of mission, vision, values and priorities), plus more advanced legal and financial strategies that may be required to provide an appropriate structure to uphold the strategy, and, most importantly, succession planning--practical plans concerning how one intends to pass on one's mission, vision, values and priorities to one's heirs, executors, etc.

I think it's interesting how many people there are who are delighted to help you do traditional financial and estate planning. Talk to almost any "advanced" financial advisor today and he or she will speak of these matters. These people are all about helping you analyze your life insurance portfolio, increase the size of your retirement account, save taxes, make more money available to your heirs.

Almost no one talks about the things that Greg spoke of as essential to legacy planning.

But legacy planning, as I see it, "adds" the entire layer (and I would like to suggest it is the more fundamental layer) of purpose. Why am I interested in passing wealth to the next generation? What is the purpose of that wealth?

As we discussed these matters, Greg asked a question. "Suppose we were to say a family has successfully passed on its legacy to the next generation if two things, at minimum, are true: 1) the family's wealth is still there when the first generation has passed away, and, 2) none of the members of the second generation have seen their lives destroyed due to improper use of funds; no family relationships have been ruined as a result of strife over money.

"Of families who use traditional financial and estate planning techniques and go no further," he asked, "what percentage would you guess are successful, according to this definition, in the second generation? How many wealthy families still have the wealth and are still relationally intact in the second generation?"

"Maybe one or two percent?" I suggested.

"Oh!" he said. "You are pessimistic! . . . No. The real number is about 30 percent. . . . Thirty percent of all families who do traditional financial and estate planning are still intact in the second generation. While the assets were prepared for transfer, the heirs were inadequately prepared to receive them. They were never given the opportunity to explore the rights, roles and responsibilities of being an heir.

"By contrast," he said, "what percentage of families do you think are successful, by the same definition, if and when they have engaged in full legacy planning?"

"I have no idea," I said.

"The statistics show 90%-plus," he said. [He referenced Roy Williams and Vic Preisser, co-authors of Philanthropy: Heirs and Values for these statistics.]

The key problem with most traditional estate planning, he said, has to do with a lack of "intergenerational communication," a lack of attention to "family systems, creating a shared family vision, and matching the passion and purpose of one's life with the purpose of one's wealth."

So Sarita and I have begun a legacy planning process.

More later.

Legacy or Estate Planning?

Henry Doorn, executive director of the Barnabas Foundation spoke at the Mission India conference. He noted (something I discovered, later, he must have gotten from Ron Blue), that there are only three places your money can go when you die: to your heirs (family, friends), to charity, or to the government. He didn't quite put it this way, but my mind put his follow-through question together with the lead-in to Evangelism Explosion's standard opening question ("If you were to die tonight, do you know for sure that you would go to heaven?") and I heard him say, "If you were to die tonight, do you know where your money would go?"

And my answer: a shocked, "No! I don't!" --Even though Sarita and I have very carefully prepared final documents.

The problem: We know we have done everything possible, via estate planning, to minimize taxes and maximize transfer to our heirs, our children. But we have done nothing to ensure anything goes to any of the charities we care about.

And the reason for this, as I realized when I spoke with Mr. Doorn later that day and as I read Blue's book, we (Sarita and I) have been dealing with estate planning professionals and not, as Blue refers to them, "wealth transfer" professionals, or, as others refer to them, "legacy planners."

I have modified Blue's summary of the differences as found on page 38 in his book:

Wealth Transfer or Legacy Planning

. . . Focuses, as a goal, upon transfer of ownership.

. . . Considers, as first priority, the impact of wealth transfer on recipients.

. . . Expects implementation--i.e., the transfer of wealth--to begin now.

. . . Involves family input first and professional advice later. [Note: As I am learning, there are professionals who can help us work through the process of acquiring family input; but their role is to help us acquire family input--perhaps along with some education about the breadth of options we might want to consider; but it is not, at that point, to advise us about which options are "better" or "worse." . . . Only after receiving the family input will such a professional, then, seek to advise us about the pros and cons of the different options.]

. . . Makes decisions based on considerations of Godly stewardship.

. . . Seeks to bring honor to God.

Estate Planning, on the other hand,

. . . Focuses on retaining control of assets as long as possible--possibly, even, beyond the grave.

. . . Considers, as first priority, the impact of wealth transfer on the donor and the estate.

. . . Expects implementation--i.e., the transfer of wealth--to begin at death.

. . . Involves professional advice first and family input later. ("Here's what the attorney suggests; what do you think?")

. . . Makes decisions based on tax implications.

. . . Seeks to bring honor to . . . (God? or the donor?).

*****

I look at these two lists and I want to move toward Legacy Planning. I'm bummed we had never heard of the concept when we first went to our estate planning attorney.