All too often, family wealth fails to last. One generation builds a business—or even a fortune— lost in the ensuing decades. Why does it happen, again and again? Often, families fall prey to serious money blunders, making classic mistakes, or not recognizing changing times.
Our wholistic approach to wealth management includes investment management, advanced planning, and relationship management with other professionals (i.e., Accountants, Estate Lawyers). This process helps prevent the following mistakes from happening to you:
This is not just a matter of failing to create a strategy but also failing to respond to acknowledged financial weaknesses.
As a hypothetical example, say there is a multimillionaire named Alan. The designated beneficiary of Alan's six-figure savings account is no longer alive. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy and updating that beneficiary form is inconvenient. Alan forgets about it and moves on with his life.
However, this can cause significant headaches for those left behind. If the account lacks a transfer on death (TOD)/payable on death (POD) beneficiary, those assets may end up subject to probate. Using the example above, Alan's heirs may discover other lingering financial matters that required attention regarding his retirement accounts, real estate holdings, and other investment accounts.1
The Advanced Planning part of our wealth management process helps prevent your heirs from being in a position like Alan's.
2. Minimal or absent estate management.
Every year, some multimillionaires die without leaving any instructions for distributing their wealth. These people are not just rock stars and actors but also small business owners and entrepreneurs. According to a recent Caring.com survey, 58% of Americans have no estate preparations in place, not even a will.2
Anyone reliant on a will alone may risk handing the destiny of their wealth over to a probate judge. The multimillionaire who has a child with special needs, a family history of Alzheimer's or Parkinson's, or a former spouse or estranged children may need a greater degree of estate management. If they want to endow charities or give grandkids an excellent start in life, the same idea applies. Business ownership calls for coordinated estate management with consideration for business succession.
A finely crafted estate strategy has the potential to perpetuate and enhance family wealth for decades, and perhaps, generations. Without it, heirs may have to deal with probate and a painful opportunity cost—the lost potential for tax-advantaged growth and compounding of those assets.
Ensuring your estate planning is a key part of our advanced planning process.
3. Technological flaws.
Hackers can hijack email and social media accounts and send phony messages to banks, brokerages, and financial professionals to authorize asset transfers. Social media can help you build your business, but it can also expose you to identity thieves seeking to steal both digital and tangible assets.
We emphasize cybersecurity and are always trying to share the latest best practices with you to help keep your information secure.
4. No long-term strategy in place.
When a family wants to sustain wealth for decades to come, heirs will want to understand the how and why, and be on the same page. If family communication about wealth tends to be more opaque than transparent, then that communication may not adequately explain the mechanics and purpose of the strategy.
Through the Life Map Interview part of our process, we help identify your values and goals, and discuss the legacy you want to leave. We also will help define a long-term strategy your family and heirs will understand.
5. No decision-making process.
In some high-net-worth families, financial decision-making is vertical and top-down. Parents or grandparents may make decisions in private, and it may be years before heirs learn about those decisions or fully understand them. When heirs do become decision-makers, it is usually upon the death of the elders.
Horizontal decision-making can help multiple generations commit to the guidance of family wealth In-depth conversations are essential; it is important to recognize that silence does not necessarily mean agreement.
With an awareness of different communication styles, we can help families make these decisions by involving multiple generation in discussions today.
Our wealth management process helps reduce these risks to family wealth in collaboration with your other professional advisors. It is never too early to begin. We are available to answer any questions that you may have. Or, if you have someone you care about that could benefit from our wealth management services, please let us know.
This material was prepared in conjunction with MarketingPro, Inc. This information has been derived from sources believed to be accurate. Please note investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such.
1. SmartCapitalMind.com, February 4, 2022
2. Yahoo.com, January 18, 2022