Stop Calling It “Estate” Planning When it’s Actually Family Planning

The most successful estate plans are driven by who and what matters most to you, rather than by tax strategies.

Goals, outcomes, dreams – call them what you will, if you don’t know where you’re going, chances are you won’t get there. Every aspect of our lives, personal as well as professional, is organized around identifying objectives, keeping our eyes on the prize, and making necessary course corrections. And since none of us can play every position or has eyes in the back of our head, we rely on myriad resources: partners, maps, coaches, game plans, newsfeeds, you name it. But first, we need to name that one big thing we’re after.

Case in point: I recently met with a client who wants to update his estate plan. With his business firmly established and kids in college, he’s ready to transition to retirement. Given his net worth, the plan he shared was highly complicated, so per ABA’s process, we built a global overview schematic. Reviewing it, however, left this very successful entrepreneur in shock: “This isn’t what I thought it was at all. It doesn’t do what I want it to do.”

Unfortunately, I hear this way too often. Not because people are remiss or don’t hire good lawyers, but because in the case of “estates”, our culture generally misidentifies the heart of the matter.

Prioritizing dollar values – the net worth of the business, real estate, and investment portfolio – over what I call “family values” yields estate plans guided by tax strategies, even though that tax landscape is constantly evolving and will likely be quite different by the time the plan is put into action. A successful, effective estate plan is guided first and foremost by who and what matters most to you; the technical, legal strategies and tactics should serve your highest purpose, not vice versa.

What does this look like? The following snapshots highlight family values-driven estate plans that prioritize people and purpose, where money is the means, not the be-all and end-all.

The View from Above

Bill’s original estate plan establishes an intricate framework of trusts with his wife as co-trustee, even though she is inexperienced and uncomfortable at the idea of managing assets and investments. For all the unique talents and skills with which he had built a net worth of $60 million, Bill didn’t seem to be able to step back from bottom-line thinking and think aspirationally. So, I engaged him in an exercise I often use: “If you could look down from Heaven 20 years after your funeral, what would make you really happy?”

“I want my wife and children and their children – the whole family – to be happy. I know I was happiest when I was productive and following my passions, so maybe my estate operates as a Family Bank. Every relative can apply for loans and grants to fund their education, buy their first home, start a business, give back to the community through organizations they really care about.” ABA worked out the technical details with Bill, creating a constitution for the bank and identifying board members.  

The Brady Bunch

Mike and Carol are on their second marriages: two high-achieving professionals with a large, blended family. He’s built a multi-million-dollar business, and she’s high up in a global finance and insurance company. To foster meaningful family relationships and create new traditions, every year they bring their children and grandchildren together for an epic quest. Think two-week safari and you’ve got the right idea. It’s not just a great location; it’s the way it heightens their connections by taking everyone out of their comfort zone to meet new people and exciting challenges. They say the closeness these experiences have engendered across three generations make the six-figure price tag well worth it.

With such a winning strategy, I wasn’t surprised that the planning and execution of a grand family adventure became the guiding principle around which the rest of their estate plan was organized. It may seem an unusual theme, but that’s my point here: the most successful estates focus on the impact that money can have on particular people, passions, and purposes.

Whose Line Is It Anyway?

Every legacy is unique, even though all estate plans share the same fundamental building blocks (e.g., trusts, POAs, investments). You’ve worked hard to shape the life you wanted, and what you’ve achieved is a meaningful reflection of who you are and what you believe in. Many people rely on the services you provide. You love your spouse and family: their happiness is your #1 priority. You have such high hopes for your children and where their talents will lead them. You’re gratified to put your personal values into action through philanthropic service; you’ve made a real difference in your community. All of these things and more combine to form the complicated tapestry that expresses your essence – and the essence of your legacy.

Author:

Nicholas Preddice, Founding Partner at The Affinity Group, helps successful people realize their ambitions for sustaining meaningful lives.

Family Values Proposition

All this talk about values-driven planning begs the question: which values, and how do we instill and sustain them? In my experience (and that of many I know and advise), happiness derives from personal accomplishment, a sense of connection, and giving back to help others.

This belief is borne out by the analysis of William Danko (one of my mentors), best-selling author of The Millionaire Next Door. His most recent book, Richer Than a Millionaire, shows that the correlation between higher income and happiness is non-existent. Greater happiness in well-to-do families is instead strongly correlated with closer family bonding because of their shared commitment to philanthropy.

Ensuring your estate plan sustains your philanthropic vision is an effective way to enhance the happiness of your heirs.