Planning from the Inside Out

When it comes to estate planning, wealth can be a great unifier, or cause irreparable divisions. Which role it takes in your family can depend in large part on how you approach your planning and whether you make a conscious effort to create your family’s legacy.

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Estate planning is an unnatural and uncomfortable process for many people. It brings you face to face with your own mortality, and forces you to make difficult decisions about how your assets will be dispersed, who will serve as guardian for your children and how your life’s work will continue. And because estate planning is fundamentally about transferring wealth, it is easy to narrow the focus almost exclusively to technical matters, such as structure and taxes.

Taking such a narrow view, however, may limit what you can accomplish in your estate planning. Today, families are more comfortable talking about money, and are more often putting family values at the center of their planning. This openness has created opportunities for families to approach the estate-planning process from a fresh perspective and create a legacy the whole family will be proud of.

From Values to Vision
By adopting a holistic approach to estate planning that includes effective communication, a clear vision and open pathways for family decision-making, you can take critical steps toward ensuring that your wealth acts as a unifying factor, rather than creating a rift. In doing so, you gain the opportunity to determine the greater meaning wealth can play within your family. This opens the door to using your estate plan as a way to create a legacy, rather than just a means of transferring wealth.

Developing a legacy is complex and involves the entire family, not just one individual. It cannot be done in a vacuum. To begin, you need to initiate a discussion with family members about your wealth and the role it plays in the family. What are your family’s core values and beliefs about issues such as education, environmental stewardship, community service and entrepreneurship? Don’t limit your discussion to the family’s money. Your legacy should tap into everything your family has to offer.

In his book Wealth in Families, Charles Collier, Harvard University’s senior philanthropic advisor, arranges capital into four categories: human, intellectual, social and financial. In addition to your financial capital, what type of human, intellectual and social capital does your family have and value? How can you use your family’s capital to further your core values and beliefs?

Be candid during this discussion about your goals and your vision of the future, and gather input from other family members about their visions. What does your family hope to accomplish, both as individuals and together as a whole? Consider your short-, mid- and long-term goals, along with how all of your family’s talents and nonmonetary attributes can best be used to achieve these goals.

You can then use this input to create a family vision statement, which can become the cornerstone of a comprehensive approach to financial decision-making and begin to shape the legacy your family wishes to leave.

For example, perhaps your family values philanthropy and believes your wealth should play a larger role than simply facilitating your own family’s well-being. What other values can you support through your philanthropy? How can you best put your wealth to work to further those values? This may be as simple as increasing your annual giving, getting the whole family involved in volunteering, or creating a family foundation.

When you begin to place the family’s values and goals at the center of your planning, it opens the door to many possibilities.

Nurturing the Entrepreneurial Spirit
When Imogene and Joe Karson decided to update their estate plan after the birth of their eighth grandchild, they opted to follow a more holistic approach and involve the entire family. In their family meetings, the Karsons identified entrepreneurship and education as two of their core values. Joe ran the business his great-grandfather had started, and Imogene was president of her own successful business. The family’s talent for starting successful businesses continued with the Karsons’ two oldest children, each of whom started a business while still in college.

Joe and Imogene decided to put their intellectual capital to work and make entrepreneurship part of their family’s legacy by creating a plan to provide their grandchildren the skills and capital needed to launch businesses of their own. They created a plan to mentor the younger family members to ensure they had the opportunity to learn the skills the older Karsons had developed in launching their various businesses. They also created accounts to provide seed capital for each of the grandchildren to use for a start-up venture of his or her own.

The Karsons also wanted to connect their entrepreneurial talent with their value of education. The family decided to work with a local high school to develop a mentoring and internship program for students. Joe and Imogene also created a scholarship fund to help some of the mentoring program’s students pay for college.

Developed in this way, the Karsons’ values of entrepreneurship and education acted as a focal point for family members to remain involved with each other around a common activity that is grounded in the family legacy. It allowed them to draw on the family’s intellectual and social capital, as well as its financial capital, and connected them to their community in meaningful ways. And, as Joe and Imogene had hoped, it brought greater purpose and meaning to their lives as the family met regularly to discuss the mentoring and internship programs and how those programs expressed their core values.

Creating a Positive Asset
Following a more holistic approach to estate planning can bring a number of benefits. It can provide parents with an opportunity to guard against the risk that wealth itself becomes their child’s main pursuit in life, without an accompanying strong set of values, such as philanthropy or a sense of family.

Following the steps in a holistic legacy planning process provides families an opportunity to pass along these other assets — assets that are just as valuable as wealth. Creating a legacy allows you to ensure your wealth becomes — or remains — a positive asset in the family that will benefit future generations in positive ways.

Laying the Ground Rules for Family Communication As your family begins the process of defining its values, you may need to set ground rules for communication before you are able to create your family vision statement. Here are some questions your family may want to address: 1. Is your family’s current decision-making style effective? If not, how might you establish a decision-making process that will work for your family? 2. Should everyone over a certain age participate in the decision-making process, or only the older generation? 3. If you have adult children, will their spouses be included? 4. How will family members relate to one another across generations? 5. Which issues will be resolved through a full family discussion, and which should be left to an individual resolution process? 6. What role, if any, should your advisors play in your discussions? 7. Where and how often should the family meet? Addressing these questions may take time, particularly if your family has had communication issues in the past. You may want to involve an impartial advisor to help mediate these initial meetings and smooth the way toward more harmonious family discussions. But taking this step is worth the effort, and will help lay the groundwork for creating a legacy the entire family will support.

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