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Legacy Management v. Estate Planning: Process or Event? Thumbnail

Legacy Management v. Estate Planning: Process or Event?

Story Family Institute

In 1789 Benjamin Franklin penned the now famous words which are often referenced by estate planning attorneys across the globe: “In this world, nothing is certain except death and taxes.” The implications to estate planning are obvious enough, but what is of far greater value is that the focus of Franklin’s observation is not about the inevitability of death and taxes but rather about the inevitability of change itself!   

What most families experience in estate planning is an event. It is often an uncomfortable, transactional focus on money as it is impacted by death and taxes. Few families prioritize a periodic review of their plan, therefore traditional estate plans become stale and non-optimal.  

What all families deserve is legacy management: an inspiring, collaborative process with an ongoing (annual or biennial) review and re-optimization of all family resources (human, charitable, and financial). After all, a family’s precious resources and objectives intersect with both the passing of time and the inevitability of change. Legacy management is empowering because the clients (and ultimately their children) are the leaders of a multidisciplinary collaborative team endeavor. 

What legacy management delivers is a long-range planning continuum involving the active management of the family’s global legacy plan seeking to minimize adverse developments and capture opportunities. Key elements of legacy management are: 

  • Collaboration. The family convenes and coordinates their team of advisors. The team might include all or some of the following: an insurance expert, an investment advisor, an accountant, a financial planner, a trust officer, and an attorney. It is possible that two or more of these roles might coexist in one advisory firm. The team will work with a common data source to minimize duplication, conflicts, and reduce errors in plan management and administration. Different advisors may have different approaches to a new development in tax law or a creative idea, and they can be hashed out amongst the advisor team to bring forth the best proposals and guidance.
  • Quantitative Analysis. A comprehensive financial planner and their robust modeling tools can provide the entire advisory team with the detailed financial data to test different approaches and to view in color graphic form the long-term impact of each idea or plan. Integral elements for creative and enduring plan design are:
    1. Determination of required Lifestyle Capital. The quantification of the current wealth-holding generation’s required assets to maintain desired lifestyle through life expectancy with appropriate margin for opportunities and for the unforeseen.
    2. Determination of Transcendent Wealth: These are assets that could be, if desired, given away immediately to charity or children without risk to the ongoing financial security of the current wealth-holding generation. To properly quantify transcendent wealth, one merely subtracts required lifestyle capital from total capital.  

Until the above two quantitative assessments are satisfied, truly inspired legacy planning is simply not possible. Great quantitative analysis unleashes the creative intellect of all team members and family leaders. Inspired thinking emerges from collective interaction and discussion. Informed decision making empowers family leaders to implement more powerful strategies that will best serve to harmonize potential outcomes with desired expectations.

  • Ongoing Review and Benchmarking Against Expectations. Every year or every other year (biennially) as the team convenes, a review of the quantitative model allows for benchmarking of actual performance against expectations. Reassessment of client expectations and objectives is revisited. Any threats to the plan or new opportunities to enhance the plan must be discussed amongst the team and the plan must adapt to new circumstances and align with client objectives. 
    1. In sharp contrast with the more traditional estate planning review event which, if fortunate, might occur about once in a decade, this more frequent reassessment process allows tactical adjustments to be made as legislation and family circumstances or objectives change. Periodic reviews keep the Legacy Plan “fresh.”
    2. Most parents of the current wealth-holding generation are enthusiastic about the appropriately timed involvement of their adult children in these ongoing legacy management conversations. The rising generation can be trained and empowered with the practical knowledge necessary for the plan’s ultimate success across many generations. 

While favorable outcomes cannot be guaranteed, doing nothing virtually guarantees a non-optimal result. As adult children witness and practice principles of this legacy management process, the next generation’s financial literacy as well as their confidence with their roles within the family matures. While most families do not own a family business, all families can be involved in the business of the family.

Please call us if you would like to discuss the Legacy Management process and how it might best be adopted by your family. We believe we can help you navigate and plan for the inevitability of change in your family’s life across many generations.


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