There is no shortage of books, TV programs, websites, companies, and songs expressing shared sentiments about money. Ironically discussing how we actually invest our own is considered a taboo subject. Marvin H. McIntyre wrote, "Money is the last taboo. People will talk about their sex lives before they discuss their finances." According to one recent survey from Wells Fargo, nearly half of Americans say the most challenging topic to discuss with others is personal finances (44 percent). But if no one is talking about it, how do we know what beliefs and behaviors divide those who get rich and manage to stay rich from those who do not?
It turns out that talking is actually part of the picture -- but it's a strong start. Families who have built and maintained inter-generational wealth have a shared vision. Be it capitalistic, philanthropic, philosophical, or an ethical mission, thriving family dynasties (i.e., multiple generations of DuPonts, Morgans, and Rockefellers) understand, no matter how detailed their portfolios, financial plans, or estate plans, none of these are substitutions for a Heritage Plan. Heritage Planning is the process of sharing one's values, beliefs, traditions, wisdom and experiences with future generations. When a family defines who they are, expresses what they stand for, hope for, believe, and do, Heritage Planning acts as the bellwether which influences how assets are used, allocated and preserved. Why is this essential?
Recognizing an individual's talents and interests helps determine their purpose within the family. Every person in a family has value above and beyond their net worth. This includes talents, accomplishments, and their service to their community, to name just a few. Each generation may have different priorities, values, and competencies. The eldest daughter who holds an MBA may weigh in on financial matters, while the son who went to culinary school might be responsible for keeping family recipes and traditions to pass on to subsequent generations. To recognize the individual's purpose within the family builds and reinforces unity. The leadership roles in the family are often separate from business or money roles. Who spearheads leadership in a social role? Who keeps track of holiday schedules and vacations? Every generation benefits from CEO of the family -- just as a business benefits from a CEO. When professional competencies, personal desires, and talents of family members are taken into account and multi-generational participation is openly encouraged, a family is on the right track. This also serves to start preparing children for their future roles and responsibilities.
Heirs learn by doing -- not by reading a bunch of legal papers. Heritage Planning is a hands-on, in-person endeavor. For it to be implemented effectively, senior family members must mentor the children through real world experiences under the guidance of other family members and advisors. It is recommended families get together at least once every year. Determining when these gatherings will occur, what topics will be covered concerning the business of the family, and what's on the agenda is a great place to begin. We recommend, in addition to the business of the family, the agenda cover traditional, fun, and personal topics to encourage the widest range of participation for the greatest number of people, and focus on teaching the children to communicate and work together effectively. The first meeting will set the tone for subsequent, ongoing activity as well as the meetings to come.
Without strong, consistent leadership, families fail. Just as exceptional leaders in corporations are made and not born, the leaders of each successive generation are rarely "born" leaders. But they can be developed. One key step is building a true collaboration between parents, advisors and heirs. No man is an island, and, leaving the responsibilities of a family's emotional legacy to any one individual is a mistake. A team of experts are not simply a theoretical part of planning, but, play a key role in providing information needed for good decision-making. The head of the family often hesitates about relinquishing control, however, for a healthy emotional legacy, the baton should be passed.
The transfer of leadership underpinning Heritage Planning isn't about what's lost, but, what's gained. Intentionally passing on leadership, versus it happening by chance or unfortunate circumstances, provides an opportunity to develop the family's leaders, discuss the direction of the family, and affect positive changes. The family's leaders become the head of the family--essentially the family's CEO. One vital relationship a successful CEO develops, whether within a corporation or a family, is with the CFO. Family dynasties dating as far back as the Medicis employed an objective professional, outside of the family, to present recommendations.
Management of a family's legacy, both financial and emotional, is ongoing. Successful families often have a process for conflict resolution to manage thorny situations. It isn't uncommon for the head of a family to shelter an heir (or their financial inheritance.) Perhaps a substance abuse issue caused mistrust, or, a family member requires round-the-clock care.
We would never suggest families task those who are not capable, interested, and motivated to have a role -- nor would we knowingly encourage anyone at risk to have access to a blank checkbook. But when the head of the family acts as its CEO, it's possible to have a conscious conversation amidst the family's senior members about who can really do what. This provides the cornerstone of planning. Seasoned members of the family may opt to share their intrinsic wealth: i.e., the benefit of their own life-lessons, work ethic, stories of the family, personal values, and philanthropic and volunteer experiences. And Heritage Planning is the roadmap for expanding a family's wealth beyond it assets. It establishes a broader context in which to build family traditions, preserve unity, and hand down a legacy while maintaining (and perhaps growing) accumulated wealth. And that's worth talking about.
No discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment or legal advice from Abernathy Group II LLC. If you wish to receive a legal opinion or tax advice on the matter(s) in this essay please contact our offices and we will refer you to an appropriate legal practitioner. The Abernathy Group II LLC is neither a law firm nor a certified public accounting firm and no portion of the article content should be construed as legal or accounting advice. Remember to contact Abernathy Group II LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Abernathy Group II LLC's current written disclosure statement discussing our advisory services and fees is available for review upon request.
This post was originally published on Forbes.com on February 2, 2015.