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Tools to Transfer Values with Wealth

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Although traditional wealth planning is effective in creating vehicles to pass wealth from one generation to the next, it falls short of helping families manage successful cross-generational wealth transfer and ease the strain that shared resources can put on relationships.

Over time, uncoordinated — or misunderstood — actions by individual family members, whether intentional or not, can erode the very fabric that binds a family together. Successful multigenerational families, however, construct technically sound estate plans while nurturing strong communication and joint decision-making skills critical to maintaining family harmony. The following communication tools may be written for different recipients, but they all center on values and the “why” behind decisions on wealth transfer planning.

 

Statement of Wealth Transfer Intent

Provide context to beneficiaries around your wealth transfer plan by sharing your intent, values and plans for supporting your family’s goals, lifestyles and priorities. Consider sharing your story ahead of time, including how your wealth was created and the lessons you have learned, perhaps even describing setbacks or disappointments.   

These statements are intended to complement your estate planning documents (but do not override the specific terms of your trusts) and allow you to expand on how your own values and life experiences have informed your plan. Learn how to develop your own statement of wealth transfer intent.

 

Written by: The Grantor | Written for: Beneficiaries

Example

I intend for my beneficiaries to have the opportunity to create their own wealth as defined by each individual. I want the trust to be used to encourage a drive for personal fulfillment and achievement. I established trusts that allow for distributions to support education and career opportunities as well as ongoing health and support needs of the beneficiaries and their families. I envision that my beneficiaries may request funds to invest in new business ventures. I view entrepreneurial efforts as opportunities for learning. I experienced several early failures with start-up businesses before founding my current business. While those experiences were very difficult, the lessons I learned far outweighed any monetary losses and ultimately led to the wealth I now can share with my family.

Letter of Wishes

Provide context and guidance to your trustee or your beneficiaries, and in combination with a Statement of Wealth Transfer Intent (SOWTI), guide decision-making on behalf of your family. Letters of wishes, like SOWTIs, can give the trustee insights into how you envision your wealth should be managed for your beneficiaries and express your hopes and desires for your family. They may include specific examples of how you expect distributions to your beneficiaries to be handled or your perspective on the trustee’s ability to address changes of circumstances, but they are not legally binding and do not change the terms of the trust.

You may execute multiple different Letters of Wishes, each intended for a different recipient (trustees and/or beneficiaries). Ideally, you would share with your beneficiaries a letter of wishes written for a trustee. Be clear in the letter of wishes to a trustee whether it can be shared with the beneficiaries if you have not shared it during your lifetime.

 

Written by: The Grantor | Written for: Trustees and Beneficiaries

Example

To clarify my intentions about why I have chosen to transfer my wealth in various ways, including setting up trusts for my family, I am sharing this letter of wishes. I hope that this communication will give my descendants a deeper understanding of how my life experience and values have shaped my goals for my family.

Growing up I never wanted for any material possessions and have enjoyed a “rich” life with family and friends. I did not fully appreciate that my position was unique until I met my partner, who had a different life experience. I was taught that money was not a subject for discussion. In raising my children, I followed this tradition, and we didn’t talk about our wealth. I now believe that discussions about money are necessary and healthy for families.

I want my beneficiaries to have a deep sense of autonomy and competency and the flexibility to seize opportunities — whether to start a business or a foundation. I wish I had used my wealth to take more chances professionally and that I had been more adventurous and expanded my experience with new people and more travel.

My family should invest in pursuits that give them a sense of passion and purpose. I want them to have fewer regrets of what might have been if they had not had to worry about the cost of losing or failing.

I have made small annual gifts to my children and grandchildren and have seen the positive impact that wealth can bring in terms of education, travel and the ability to spend time gaining skills that are important to my beneficiaries. I believe I have used my wealth wisely and believe that my family will do the same with access to the right resources.

Cornerstone Statement

Articulate your family’s shared values, vision and goals to build on values of the past and project them onto a shared vision for future success. By identifying actionable steps to bridge their current and desired future state, families can create a common purpose for today. Unlike a SOWTI, which is focused on the purpose of the grantor, a cornerstone statement captures a family’s consensus on their core values, future goals and their commitment to working together to achieve those goals. The process of building a Cornerstone Statement is as important as the statement itself. Embracing the natural diversity families develop over generations leads to both a well-informed vision and a high functioning family. By developing a Cornerstone Statement, families can create transparency, foster trust, develop repeatable communication patterns and bolster joint decision making skills that will serve them long into their future.

Written by: The Collective Family | Written for: Beneficiaries and Trustees

Example

Our family is dedicated to compassionate involvement in each other’s lives and advocating for each other’s well-being. Through open communication, mutual respect and a family-first mentality, we will continue to cultivate a strong family that will prosper for many generations to come. We desire to stay motivated and active intellectually, physically and emotionally, continuously searching for ways to improve ourselves, our family and the world around us. We are committed to:

  • Maintaining good health, both physical and mental
  • Pursuing a life of education across multiple functions and interests
  • Identifying philanthropic opportunities that promote diversity and equity for all
  • Creating wealth transfer plans that promote financial responsibility and independence

Family Values Statement

Coalesce around how your family’s wealth can be used to gain consensus on issues important to your family. In the context of ESG investing, these statements can be used to identify shared values and sustainable objectives, giving every trust beneficiary a voice in how the portfolio can be leveraged to make an impact and reinforce intergenerational harmony by aligning on sustainable investment goals. At Northern Trust, we have worked to establish a process by which beneficiaries with consensus sustainable goals may be able to implement sustainable objectives in their trust portfolios.

 

Written By: The Collective Family | Written for: Trustees

Example

Our family believes that everyone has a right to clean air and water. As such, we are committed to climate-aware investments that seek to promote better ecological practices around the globe. We therefore ask that our investment team use ESG factors in their due diligence, asset selection and monitoring process to identify investments making a positive environmental impact. As a family, we are committed to reassessing this statement periodically to ensure its continued relevance.

Consult an advisor to facilitate a more harmonious and purposeful transfer of both wealth and, importantly, family values using these tools.

Multigenerational Families

Transfer Wealth Purposefully

Request our workbook to develop your own Statement of Wealth Transfer Intent.

Multigenerational Families

Transfer Values with Wealth

Maintain family harmony with these wealth transfer tools.

Disclosures

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel.  All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

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