By considering these questions, you can ensure you begin the process on the right foot
by Chris Delaney
Effective wealth transition begins with achieving clarity of planning purpose in order to become a successful advocate for your outcomes. In estate or farm transition planning, you must ask fierce and honest questions from the beginning of the process, through the plan’s execution and finally in the plan maintenance phase. High-quality questions lead to relevant strategy and successful tactics.
Here are five questions you should ask yourself and your family before you start any tactical planning with your professional advisory team:
- What MUST happen from this planning?
An additional way to start with this question is to ask, “What MUST NEVER happen from our planning?”
These values-based questions are seldom considered at the outset of transition planning. People are typically fixed on the end product rather than on the consequences of that end product. Better planning occurs by focussing early upon the intended and, potentially, unintended consequences.
For example, assume one of the planning goals is to maintain family harmony. If an obvious or potential consequence of the planning is that a child will be surprised or angry, then it is prudent to take measures in advance to address that outcome.
- What is the purpose for these accumulated assets in the context of shared family capital?
Intergenerational wealth transition often exclusively attends to financial or business assets. However, financial capital exists to serve other sources of family wealth including social, intellectual and human capital.
This question is about identifying the core mission of your family. The discussion helps you understand why it matters that you stay together as a cohesive group and how your financial assets can help advance that mission. Thoughtful answers to this question will help eliminate inappropriate and damaging tactics.
- Is our ability to communicate critical and emotional concepts between generations up to the task?
Have you reviewed how your family makes important financial and business decisions? Have you shared the skills you learned with the next generation of wealth stewards and owners in your family enterprise? Can you think of a situation where your communication and decision-making style was an objective failure?
In many cases, families communicate and govern according to the golden rule. That is, whoever has the gold, makes the rules. That style may be inadequate as the rising generation necessarily becomes more involved with key wealth transition conversations.
It is incumbent on the first generation to encourage updated communication and governance scaffolding to ensure better planning outcomes.
- What is the strategy that will underpin our eventual tactics?
Tactics often drive transition planning. Families become preoccupied with reducing the tax bill, for example, and lose sight of achieving broader and sustainable intergenerational goals.
Do you need a will or an integrated, intergenerational wealth transition plan? A big difference exists between these two planning poles.
Tactics without strategy are very risky. What are your goals, objectives and recipes for action? How do they all fit together and support one another?
It is time to proceed to tactical execution only after you have explored these questions.
- Can we leverage our existing advisor network to achieve our planning goals?
Your responses to the first four question areas will begin to define the professional advisors you need to help create the eventual plan.
Lawyers are needed for legal planning, agreements and wills. Accountants frame and implement tax planning structures. Bankers will help you fund certain tactics.
However, what if one of your goals is to promote intergenerational harmony, establish financial awareness in the rising generation or defuse a toxic relationship between future heirs? Who will help you with those problems? How should those issues be dealt with in relation to the tax, legal and funding concerns? In what priority?
If your existing advisory circle can’t reasonably be expected to manage these issues then additional advisors – like coaches, business consultants, mediators and family enterprise advisors – will be needed.
Abraham Maslow, an American psychologist, wrote to the effect that if the only tool in your tool belt is a hammer then, after a while, all your problems start to look like nails. Are you prepared to add the tools you need to your planning tool belt?
These five inception-level questions will help you raise your planning to the next level and ensure intergenerational transition success is more likely.
Chris Delaney (B.A., LL.B., B.Ed., TEP, FEA) is a family enterprise advisor, lawyer, professional speaker and intergenerational family wealth strategist. He is the author of The Naked Opus: Growing Your Family Wealth for the Long Term. For more information, visit nakedopus.com/.
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