The most important goal when it comes to the transfer of assets from one generation to the next – and often the biggest challenge – is defining values and priorities that will shape a family's future and protect their wealth.
"Family legacy planning is about more than money," says Judith Saxe, managing director at Atlantic Trust. "It's a way of helping parents discuss sometimes uncomfortable issues of wealth, estate or legacy planning with their children, especially if they're worried that wealth will destroy their children's motivation or desire to excel or match their parents' financial success."
Having intentional and purposeful conversations about the things that sustain and enrich the family – things that have little to do with material wealth – will help family members define not only what their assets are, but also what their wealth really means in the big picture, says Saxe.
After examining the family's assets, the first step in the legacy planning process is to develop a family mission or vision statement that spells out shared values and describes how the family's wealth should be used to support and further the family's legacy. Although this vision statement can evolve over time, it fulfils at the outset a primary objective that many first-generation wealth creators have when thinking about legacy: providing clarity and inspiration for the generations that will follow them.
"Each family will define those goals and values differently," says Saxe. "For some, it means ensuring the well-being of future generations, while allowing them to leave their own imprint on the family wealth. Others may wish to tell and preserve a story about how that wealth was built over time. Or, there may be a philanthropic component as a vehicle for preserving a specific philosophy or set of values."
To bring that vision to life, families should look beyond the standard legal documentation (wills, trusts and philanthropic vehicles). Creating an ethical will that complements a traditional will can ensure that wealth owners not only transfer what they have, but also what they know. An ethical will can also set the stage for a deeper conversation about the greater purpose behind what's contained in those other legacy documents. A letter to trustees can also be useful for bridging the gap between the legal statements made in a trust document and the richness of perspective on a wealth owner's intent that only that person can provide. Writing the family story also helps to crystallise the values and vision of people who created the wealth in the family.
Thoughtful and discerning affluent families understand that they have an enormous responsibility to create the framework for a family legacy plan that promotes family continuity, manages change within the family and articulates clear roles for all of the wealth owners in the family, says Saxe.
"If done well, identifying these issues may be what makes estate planning's legal and tax provisions understandable and meaningful," she says.
