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Oct 31, 2017

How can I preserve my family values for future generations?

Those who have attained great wealth almost always have in common one worry: how their money will affect their heirs. Will a son or daughter work less, having inherited a fortune? Will grandchildren be good stewards of the family wealth, or will their inheritance rob them of motivation to pursue their personal passion?

Creating a lasting family legacy requires a plan, commitment and communication; and achieving those aims begins with a vision statement outlining the family’s values, beliefs and objectives.

Here, younger family members need to be involved, not just informed. That involvement may take the form of an annual retreat that offers a fun diversion but also addresses specific agenda items. At such gatherings, family members can discuss topics like: family history, personal philosophy, traditions and values, philanthropic desires and estate and tax-planning issues.

The point is that younger members should feel they are a part of the family legacy, not just its recipients. The most successful, wealthy multigenerational families exhibit a willingness to invest in the dreams of their successive generations, and honor the core principles of hard work and following one’s own path of purpose.

Yet, despite such positive goals, wealth can create problems if a feeling of obligation exists, to follow in the wealth-creator’s footsteps.

Likewise, pressure on beneficiaries to live up to some unattainable example of following one’s own path may cause withdrawal from the family. These are areas that a family wealth advisor can help navigate.

The wealth creator’s responsibility, meanwhile, is to draw up a family governance system, with defined roles, decision-making processes and rules for family members. The system should have enough flexibility to accommodate family changes and changes in the outside world. A formal process for making family decisions is helpful here.

Beyond these communication structures, what’s also important to consider is the common use of an incentive trust, which allows a grantor to exert control after his or her passing.

Conditions can be imposed on the beneficiary to, for example, complete a certain level of education or work a certain number of years before receiving an inheritance. Careful consideration should be given to providing beneficiaries incentives, not just hoops to jump through.

There are also potential drawbacks here. So, to make sure your true intent is captured, it is important to consult with a qualified advisor. For one thing, the terms of most trusts cannot be changed, even if a situation arises that was not the giver’s intent. Some incentive trusts have tried, for instance, to restrict a beneficiary’s marriage to a person of a certain faith or ethnicity, or to impose other personal strictures. These restrictions have not held up in court; a trust can be a powerful tool, but it has its limitations.

Legal limitations apply, as well: Incentive trusts must be drafted by an experienced attorney, who can accurately capture the creator’s intention. Also vital is the appointment of a responsible trustee who can act in the best interest of the trust’s beneficiaries.

Further, some families employ an ethical will, which, while not a legal document, records things you want to share: your life story, values, blessings, hopes for the future, etc. It is a record of your very essence, expressed as writings, videos or other multimedia formats.

Overall, creating a legacy does not happen by accident. It begins with the hard work we do with families to help them define and preserve their traditions and values and communicate these values to future generations.

As a family-focused business, we have the experience to assist your family in creating the legacy you envision.

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