Canada Wins Gold, USA Botches the Transfer. Which One Are You?
The recent Olympic 4 X 100 men’s relay is a great metaphor for family wealth transfer. The key to winning is in the preparation and execution of the hand off. You can have fast, talented team members but if the baton is not transferred well, you will have a disappointing finish.
The US team were favourites but botched the first transfer and immediately the TV commentators were lamenting the massive mistake that immediately took the US out of contention. Canada on the other hand, although perhaps an underdog, transferred well and took home gold. Is your transfer going to take you out of the race or earn you gold?
After decades of helping families successfully win in their wealth transfer, our experience is very few are properly prepared. Without holistic planning, the typical approach is to pass as much to the next generation while paying as little tax as possible with minimal discussion. The significant problem with this default approach is the impact on your heirs has not been considered. What are the abilities and challenges of your heirs? At what level does your intended blessing turn into a curse and harm a child? This approach also ignores the valuable lessons learned and character developed from some hardship. Your success is a result of your perseverance and development because of difficulties, so don’t rob your children of this gift.
Chances are, you have managed your wealth accumulation really well or you would not have significant assets. You now have the opportunity to extend the personal benefits of good stewardship to the next generations and build a legacy of family stewardship.
Each steward is responsible for the hand off to the next. Are your next stewards prepared to manage well? What overall training do they need and where is each child at in this process? What practice is needed by each child in receiving assets and running with them?
Is your transfer going to take you out of the race or earn you gold?
Three transfers happen in the 4 X 100 relay. You only have the option for three transfers as well – your heirs, your favorite charities, and tax. The allocation percentage is your choice. As you adjust the allocation in different directions it will have an impact and could even eliminate tax. You also have the opportunity to involve family in your charitable giving process. Not only is this is a learning opportunity for your family members, but also an opportunity to build relational wealth, enhance unity, and bonding.
Some key questions to answer as you prepare for your transfer are:
- What is it you want to accomplish for your heirs through the transfer?
- What is it you want to avoid through the transfer?
- What is the best timing to not derail the maturation of your heirs but also be received when the need is greater?
- What is the allocation that will create the maximum impact?
A successful transfer requires discussion. You are in the best position to recognize, address and diffuse the family issues that are at or just below the surface. Give your family the gift of the cleanest hand off possible, don’t drop the baton in this area. Invest in professional counsel if necessary. It is not your heirs’ responsibility to deal with your transfer, so don’t make them pick up a bouncing baton.
You have the opportunity to stand on the podium, but it doesn’t just happen without effort. It requires preparation, training and practice. The upside to executing your transition well is massive and will impact generations – Go for the Gold!