Have a sound plan for pre­serv­ing the for­tune you leave be­hind

RSWLiving - - DOLLARS & SENSE - BY STEVEN V. GREENSTEIN Steven V. Greenstein is Ex­ec­u­tive Vice Pres­i­dent, Wealth Ser­vices, for The Sani­bel Cap­tiva Trust Com­pany.

We’ve all met en­trepreneurs who have built suc­cess­ful busi­nesses and then sold them or left them to their chil­dren. The in­ten­tion was that their fam­i­lies would reap the re­wards of a life­time of hard work. No doubt, th­ese en­trepreneurs had vi­sions of leav­ing a legacy to their heirs—one that would last for sev­eral gen­er­a­tions. But through­out his­tory, as far back as bib­li­cal times, the tale of riches to rags in three gen­er­a­tions shows how dif­fi­cult it can be to make the money last.

Usu­ally, a busi­ness is most pro­duc­tive and suc­cess­ful while the founder is still alive and in­volved. How­ever, too of­ten the founder ne­glects to share key in­for­ma­tion about the busi­ness, leav­ing heirs with­out an un­der­stand­ing or ap­pre­ci­a­tion of the values of hard work and thrift, which made the busi­ness thrive. In ad­di­tion, flawed es­tate plans can fail to ad­e­quately de­fine who ex­actly will in­herit the wealth and how it will be pro­tected and con­trolled. Through­out his­tory, th­ese very is­sues have ex­tin­guished great wealth in short pe­ri­ods of time.

To­day, sober­ing statistics show that the chil­dren and grand­chil­dren of for­tune-build­ing par­ents will lose 65 per­cent of the wealth in the next gen­er­a­tion and 90 per­cent by the fol­low­ing gen­er­a­tion. Con­tribut­ing fac­tors can in­clude tax­a­tion, mar­i­tal claims, mis­ap­pro­pri­a­tion, mis­man­age­ment and fam­ily strife. But of­ten, it boils down to the neg­a­tive per­sonal ef­fects of in­her­ited wealth. By this we mean that sec­ond and third gen­er­a­tions of­ten in­herit with­out crit­i­cal prior guid­ance re­gard­ing the pur­pose and ob­jec­tive of money. They sel­dom take the time to un­der­stand the values that cre­ated the in­her­i­tance in the first place, which are es­sen­tial to main­tain­ing a healthy re­la­tion­ship with their newly ob­tained wealth.

How­ever, with a sound plan in place that doesn’t have to hap­pen. An es­tate-plan­ning at­tor­ney is a vi­tal mem­ber of the high net-worth busi­ness owner’s ad­vi­sory team. It is the at­tor­ney’s re­spon­si­bil­ity to cre­ate the doc­u­ments that will pro­tect the wealth from tax­a­tion and de­struc­tion from other in­side fam­ily in­flu­ences, such as cred­i­tors, spend­thrift heirs, mat­ri­mo­nial claims, and fu­ture le­gal as­ser­tions.

Of equal im­por­tance is as­sist­ing the sib­lings in cr eat­ing “fam­ily gov­er­nance,” a means of reg­u­lat­ing the in­volve­ment of the en­tire fam­ily struc­ture, which high­lights the vi­sion of the founder and the orig­i­nal aims and wishes of how this wealth should ben­e­fit heirs in the fu­ture. Ul­ti­mately, the plan must en­sure that the wealth is pro­tected, prop­erly man­aged, and that the fam­ily mem­bers will lead healthy, happy and mean­ing­ful lives for gen­er­a­tions to come.

A key plan­ning tool be­ing uti­lized to­day by high net­worth busi­ness own­ers is the use of a Fam­ily Of­fice Ser­vices group. Th­ese ad­vi­sory team mem­bers have the cu­mu­la­tive ex­per­tise to as­sist the founders in es­tab­lish­ing and ex­e­cut­ing proper suc­ces­sion plan­ning, fam­ily gov­er­nance, in­vest­ment man­age­ment, es­tate and tax plan­ning, fam­ily foun­da­tions, and other phil­an­thropic de­signs for their fu­ture heirs.

His­tory has taught us that it is hard to cre­ate wealth, harder to keep it, and hard­est to give it away pru­dently. As King Solomon warned, “An in­her­i­tance gained hastily in the be­gin­ning, will not be blessed in the end.”

LE­GAL, IN­VEST­MENT AND TAX NO­TICE: This in­for­ma­tion is not in­tended to be and should not be treated as le­gal ad­vice, in­vest­ment ad­vice or tax ad­vice. Read­ers, in­clud­ing pro­fes­sion­als, should un­der no cir­cum­stances rely upon this in­for­ma­tion as a sub­sti­tute for their own re­search or for ob­tain­ing spe­cific le­gal or tax ad­vice from their own coun­sel.

Statistics show that the chil­dren and grand­chil­dren of for­tune-build­ing par­ents will lose 65 per­cent of the wealth in the next gen­er­a­tion and 90 per­cent by the fol­low­ing gen­er­a­tion.

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