Legacy Management

In 1789 Ben Franklin penned the now-famous words which estate planning attorneys often reference: “In this world, nothing is certain except death and taxes.” However, Franklin’s observation is not about death and taxes but rather the inevitability of change!  Managing the inevitability of change epitomizes the executive experience.

What most families experience in “estate planning” is an event. It is often an uncomfortable focus on money as impacted by death and taxes. Few actively employed executive families living under the tyranny of the urgent prioritize a periodic review of their plan; therefore, traditional estate plans generally become stale and non-optimal.

What families deserve is a “legacy management” process with a biennial (every other year) review and re-optimization of family resources (human, charitable, and financial). Regular reviews are necessary because a family’s precious resources and objectives intersect with the passing of time and the inevitability of change.

What legacy management delivers is a long-range planning continuum involving the active management of the family’s global legacy plan. The process seeks to minimize adverse developments and capture new opportunities, which change brings. There exist three vital elements to the legacy management process:

  • Collaboration. The family appoints a trusted advisor who convenes and coordinates the team of advisors and all meetings. 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. Three or more of these roles might coexist in one advisory firm. The team will work with a shared data source to minimize duplication, conflicts and reduce plan management and administration errors.
  • Quantitative Analysis. Vital quantitative elements for creative and enduring plan design are:
    • Determination of required Lifestyle Capital. The quantification of the current wealth-holding generation’s required assets to maintain their desired lifestyle through life expectancy with appropriate margin for opportunities and unforeseen events.
    • Determination of Transcendent Wealth: Transcendent wealth is 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 not possible. Great quantitative analysis unleashes the creative intellect of all team members and family leaders. Informed decision-making empowers family leaders to implement more powerful strategies that will best harmonize potential outcomes with desired expectations.

  • Ongoing Review and Benchmarking. Biennially, a review of the quantitative model allows for benchmarking of actual performance against prior expectations. In addition, client objectives are refreshed, and any threats to the plan or new opportunities are discussed. Finally, if necessary, the plan is amended to conform with current client objectives.

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. Thus, periodic reviews keep the Legacy Plan “fresh.”

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. As a result, the rising generation can be trained and empowered with the practical knowledge necessary for the plan’s ultimate success across many generations.

Doing nothing is easy, yet it almost guarantees a non-optimal result. As adult children witness and practice the principles of this legacy management process, the next generation’s financial literacy and confidence in the family matures. While most families do not own a family business, all families can be involved in the business of the family.

Stoddard Barnhill
sbarnhill@thebahnsengroup.com

Phillip Barnhill
pbarnhill@thebahnsengroup.com

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The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Bahnsen Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on their behalf. Hightower Advisors, LLC, do not guarantee the accuracy or safety of any linked site.

Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client’s individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for related questions.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Authors

Phil Barnhill, CLU

Private Wealth Advisor
Director of Risk Management

Stoddard Barnhill, CFP®

Private Wealth Advisor

For nearly 25 years Phil has worked exclusively with senior leaders of public and large private companies. Over the past six years Stoddard has been carefully mentored in this niche market, leading to a highly-specialized practice knowledge within the team. This focus on corporate executives and their family dynamics comes with significant insights into executive compensation, stock concentration, equity monetization, and the full life-cycle of a career in the C-Suite.

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