At the Alchemia Group we are helping our clients think & act differently in regards to their wealth and its impact on thier family - because we know it is more than just numbers and plans, it's the Balance of Art & Science with Pragmatism and Vision.
As I finished up work on my book, The Middle Way: Using Balance to Create Successful Generational Family Wealth Transition Plans, I paused to think about what are the root causes of stress and angst when families deal with financial assets and issues. While not trying to oversimplify, I really believe one of the leading causes is lack of mindfulness when it comes to actions. By this I mean really taking time to think about the impact your action is going to have on yourself and your family. Will it really achieve something meaningful or is it something you are doing because someone else told you it is a good idea.
When it comes to wealth planning and dealing with financial assets too often strategies are presented as the be all and end all. Yet, with a little mindful conversation beforehand, these same strategies can lead to wonderful results.
Over the next few months I plan on sharing stories of actual families where applying mindfulness to their planning created a different, more impactful and positive result. Here is the first:
The first high-wealth family I helped through vision-based planning involved a man named Joshua who had immigrated to the United States as a boy the late 1930s. Through hard work, he built a very successful metal distribution company.
His personal life was not tidy.
Joshua had three sons from his first marriage. All three were very capable men. James and Bill worked in the family business. Joshua’s other son, Steven, the eldest, had his own metal recycling business, which Joshua had helped establish. The boys’ mother, Jessie, was Steven’s bookkeeper.
Joshua’s current wife, Erin, had been a neighbor at the family’s lake vacation home, which is how she met Joshua, who had been married to Jessie at the time. Erin had two adult children from her first marriage and now lived with Joshua in an expensive suburb of New York City.
A deep culture of mistrust and dislike existed between Joshua’s children and his stepchildren.
I met Joshua to help him with some simple life insurance planning. When I asked him how he ended up in his business, he told me a fascinating story about hard work, opportunities, and the satisfaction of seeing his dream come to life. He had come to America by himself at age nine. He had no formal education and worked for his uncle in a foundry where Joshua discovered he had a knack for both metals and numbers. Eventually, he opened his own metal distribution company. Starting small, he gained a reputation for honoring his promises, pricing fairly, never taking advantage of situations, and being ruthless in collecting his accounts receivable.
When I asked him what he hoped his success would do for his family, Joshua replied:
“I know I have created complications in my life. In my own way, I still love Jessie. I have worked hard to have a good relationship with my sons. Steven has been particularly challenging because he is very close to his mother and took our split very badly. I feel good about our relationship now because he sees us as business peers. Not working with me was the best thing for him, and I am happy he allowed me to help him establish his own company.
“My most important goal is to make sure I never leave assets in a way that causes fights and lawsuits. I want to be sure Erin is taken care of, and I want James and Bill to be able to continue to run the business for their families. I want to be sure Jessie is taken care of, and that Steven knows how much I love him as my son and respect him as a man. I do not want him to feel left out because he does not work here. Can we do this?”
We started by looking at his balance sheet:
“Erin loves our house, and I know she is concerned about being able to stay in it,” Joshua told me. “I want her to have it free of debt and with enough income to live the same life we have now, but I do not want her to give my money to her children when she is gone. I worked for it, and it should belong to my sons.”
I could tell that Joshua loved Erin but had a fractured relationship with her children, so I asked an important question: “Would Erin feel good if she were able to leave a legacy for her children and grandchildren?”
Joshua nodded, “I suppose so.”
I asked one last question: “How would it impact your relationship with Erin if your plan included a provision that allowed her to create that legacy for her children and grandchildren?”
We then discussed the implications for Erin, Jessie, and his sons if the overall plan included allowing Erin to control some assets.
As we reflected on the possibilities, Joshua said something powerful: “I have never thought about it like this. This is not about my relationship with Erin’s children but about my relationship with Erin. I should not let a relatively small percentage of my net worth create a wedge between us.”
In the final plan, Joshua established an independent basket of assets for each family member in the event of Joshua’s death. In Erin’s case, he gave her full control to pass on assets to her children and grandchildren, which meant a lot to her.
“I have not seen her smile with tears like that since our wedding day,” Joshua reported to me. “Knowing I cared enough for her to surrender control really meant a lot. Looking back now I can see that it was one of the best decisions I made.”