Three Steps to Prevent Family Value Risk

When you consider the goals specific to your assets, chances are you are thinking in terms of values, not money. For example, you may wish to help your children and grandchildren feel fulfilled, live responsibly and support causes you care about — rather than wanting them to accumulate certain possessions or reach a particular dollar level of wealth.

But will your plans unfold as intended? Will your hopes, backed by dollars, come to fruition? After all, the many college savings vehicles, trusts, and foundations that are carefully put in place don’t guarantee happiness, and plenty of inheritances cause discord rather than harmony and fulfillment due to lack of communication. How does one transform wealth intentions into outcomes?

Building the Bridge Between Intentions and Outcomes?

A family value approach to wealth management addresses these risks. It goes beyond investment returns to focus on the overall return on family wealth, love, shared values, estate planning, intentional and inclusive communication. It is prioritizing family meetings that enable these benefits to transfer from one generation to the next.

However, just like any other wealth management approach, a family value approach requires careful risk management to succeed. Managing family value risk can be even more complex relative to traditional industry frameworks because it involves complicated qualitative factors, such as family dynamics, wealth stewardship and emotional well-being. But the payoff — helping your family make ideal decisions and thrive across generations — is also greater. In fact, it is priceless.

To help your family pursue this invaluable payoff, we offer three steps toward ensuring your financial plan protects against family value at risk.

Three Steps Toward Managing Family Value Risk

1. Create and/or review your estate plan together.

You might feel like everything is OK. But this is often because telling yourself everything is “fine” is easier than taking action to address opportunities for improvement. In conversations with colleagues or acquaintances, this might be sufficient. But in the context of wealth planning, you need to dig deeper — contemplate any changes in your life or your loved ones’ lives that merit attention and, possibly, adjustments to your estate plan.

For example, life events such as a family member’s marriage or divorce can significantly impact your estate intentions but are easily overlooked in estate planning documents for years. Likewise, the circumstances of your loved ones change over time. Perhaps one of your children or grandchildren decides to pursue a worthy but less lucrative profession, while another is financially reckless. You need to contemplate these types of details regularly to ensure your estate plan addresses them in ways that align with your intended wealth transfer outcomes.

When is the right time to ask your advisor to review your estate plan and tie it into your overall goals? The short answer: now. Who should you include in this planning? First and foremost, you should include your spouse, if you have one, and when you’re ready, you should slowly share it with the rest of your family. If you don’t communicate your intentions, they will be left open to interpretation after you’re gone, risking family conflict and other unintended consequences.

2. Build a family net worth statement

Life moves fast. There is just too much going on around us to remember the details of investment accounts, portfolio assets, insurance policies, mortgage rates on residential and investment properties, and more. Therefore, taking the time to document everything in one place can save you and your family significant time and stress down the road.

You’re likely to react to this suggestion in one of two ways: “Wow, this makes sense, I really need to sit down and do it” or “I don’t have that problem because I don’t have that complicated of a financial picture. I’ll do it when I need to.”

If you fall into the second category, the truth is, you still need to do it. As straightforward as they may seem, your assets — 401(k) accounts, insurance policies, checking and savings accounts, home, car, etc. — need to be cataloged to provide a view of your entire financial picture, help yourself now and your loved ones should something happen to you.

While this may seem cumbersome or overwhelming, lean on your financial advisor, we have guided clients through this process numerous times.

3. Develop your legacy plan

There are many ways to develop your family’s legacy plan. At Lerner Group, we’ve created a short three-step process to serve as a guide.

1. Reflect on your history.?Reminisce about your childhood — life with your parents, your schooling, your career and your family life. Many stories are bound to bubble up. Write them down. It is powerful to look back at everything you’ve lived through and draw connections between the moments in your life that have shaped you and your accomplishments. Such stories are wonderful to share with your family; they demonstrate where you came from and what you’ve been through.
2. Inventory your values. Next, think about experiences that have stood out for you as an individual or as a family — and how these experiences have impacted your life and driven your actions. One example is my business partner,?JR ?Gondeck, whose youngest son was born with a heart defect. His experience navigating such a challenging time sparked a multigenerational legacy of giving back. Now, he and his family dedicate their time, energy and financial assets toward raising awareness and helping other families going through similar situations.
3. Align around a shared family legacy.?Finally, draw connections between your history and your present-day values — complete with the morals, beliefs and causes you cherish. Share these connections and related stories with your children and grandchildren in planned family meetings. My family legacy ties closely to helping others, I plan to continue this value by having my children participate with non-profits and support other children in need across the world. Allowing your family to share their thoughts and feelings about what the legacy means to them will help them understand the reasoning behind past decisions and give a purpose to future generations. Ideally, these conversations would ultimately result in a family legacy statement. The whole point is to capture your family’s unique history, values, and shared purpose.

While wanting the best for your loved ones — both financially and holistically — may come naturally, the above steps often do not. For tools to help, pick up a copy of our book,?Family Value at Risk: Inclusive Communication to Pass on Your Family’s Wealth and Legacy , or?contact us for a free chapter . We also welcome the chance to meet with you, introduce our family value approach to wealth management and explore how we can help your family build a legacy more valuable than your money.