Lunch & Learn Importance of Family Meetings

June 9, 2016

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Agenda

• The Facts

• Family Meetings: Why & How

• Getting organized

The Facts

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$59,000,000,000,000

$59 Trillion will transfer from 93.6 million American estates over the next 50 years

• It’s expected that a little more than half of that will transfer directly to Generation X and Millenials ($30 Trillion)

• The remaining $29 Trillion going to Charity and Estate Taxes

• By far, the largest wealth transfer in American history

• Research has shown that 70% of family money disappears by the end of the second generation, 90% gone by the end of the third

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Most common problems

While it may seem like a blessing for a child to receive a large inheritance, if not structured properly it could have some very serious consequences

• How many 18, 21, or even 25 year old’s do you know have the discipline and maturity to handle one million dollars directly after the biggest loss in their life?

Adult child (27) receives inheritance of $300,000

Pays off credit card debt; $270,000 left

Buys a new car with cash, $220,000 left

Helps out a “friend in need; $170,000 left

Purchases risky Real Estate investment, $0 left

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Creditors & Predators

Common scenarios that cause assets to disappear or go where they were not intended to:

• Divorce• Lawsuits & Judgements• Bankruptcies• Immature Financial Management Skills• Mental Health / Substance Abuse• Blended Families• Remarriage

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Sound familiar?

In a recent survey conducted by Rocket Lawyer they asked:

Do you have a will; if not, why?

57% - said they “just haven’t gotten around to making one”

22% - felt that making a will wasn’t urgent

17% - didn’t think they needed a will

Family Meetings: Why & How

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Why A Family Meeting?

• Promote stewardship: the responsible oversight and protection of something worth caring for and preserving

• Important tool for families to share values as well as estate and financial plan

• Embrace the challenge to discuss thoughtful planning that has been done and its impact on family members

• Timely communication of details; is it better to exchange this information while all generations are still living and with capacity to do so?

• Prepare heirs for future roles and responsibilities and perpetuate a legacy

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Why A Family Meeting?

• Forum for collaborative decisions

• Educate heirs on financial literacy or estate plan

• Create atmosphere of trust

• Open lines of communication that may be closed

• Establish family leadership roles and responsibilities

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Two Types of Inheritance

Financial – Most familiar one

Emotional – Sum of values, stories, life lessons and family traditions

Heritage Statement:

Describes who you are, what you believe in and what you stand for. Not a will or contract but is one from which generations of your family can draw strength, meaning and guidance during difficult times. It is a statement of true legacy.

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Family Meeting Types

Values

• Discover shared family values – a framework for future decision making

• First meeting, perhaps do not share numbers but only values

• What are the responsibilities of the next generations?

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Family Meeting Types

Wealth

• What is Meaning of Money – personal/family goals

• What are future expectations for this wealth?

• Create understanding between older and younger generations

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Family Meeting Types

• In-person vs. virtual

• One afternoon or various weekends

• Single or multiple generations

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Business Owners

• What is the future of the business?

• Impact of business succession on family members and generations

• Formalize decision making process, a/k/a governance

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Difficult Issues or Conflict

• Identify unique issues – how best to manage?

• Conflict Resolution

• Financial Setback

• Fairness

• Geographical distance

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Keys to Success

• Get input from all family members as part of process

• Prepare meeting agenda and set time limit

• Determine use of any 3rd party – estate planner, financial planner or trust officer? Establish who is going to run the meeting.

• Attendees – who should come to this meeting?

• Set ground rules for conduct

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Keys to Success

• Be punctual and prepared while ready to listen

• Keep meeting minutes and distribute to all

• Avoid temptation to get everything done in one meeting

Question: What do the “Successful 10%” do differently than the rest?

Answer: Consciously prepare their family for financial and emotional inheritance

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Potential Agenda Items

Most Important: Purpose is to communicate

• Define wealth and inheritance – assets, liabilities, insurance, real estate

• Family legacy – what does your family want to be known for?

• Assign family roles and responsibilities

• Is there a need for beneficiary education?

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Potential Agenda Items

• Shared philanthropy – do family members agree on selected charities? Do family members agree on philanthropy in general?

• Education – children/grandchildren/great grandchildren

• Family issues – prenuptial agreements, divorce, spendthrift, older parent health care and cost

• Family history – awareness of family history and issues

• Mission Statement – core values, collective goals, personal attributes

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When is Best?

• Best to start process when beneficiaries are in mid-20’s

• Hopefully, transparency and reduced uncertainty will result

• Not about frequency of meetings (one may be sufficient) – it’s about the importance of content and impact that meeting together can create

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Pillars of Purposeful Philanthropy

• Good people treat others as they would like to be treated

• Generous people treat others better than they would like to be treated

• Wise people do not indulge in being good or generous. Instead, they treat people as they need to be treated – Sufi Proverb

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Family Meeting

Planning for the future of money is not the same as planning for the future of the family...

Getting Organized

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Clean up and get organized

• Close unwanted or unnecessary credit cards

• Consolidate and simplify investment accounts

• Minimize the number of bank accounts

• Get rid of unnecessary documents

• Discard all old life insurance policies

• Locate deed to house and title to cars

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Review estate documents

• Make sure all documents are updated and in good order

• Review beneficiary designations on IRA, 401k plans and life insurance policies

• Review ownership of assets – joint assets vs. individual ownership

• Understand survivor pension options

• Talk with attorney about real estate owned in another state

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Talk with your family

• Discuss with your family your estate fiduciaries

• Final plans – burial, cremation, funeral director, grave site, military honors, organ donor

• Where is safe deposit box, address, where is the key

• Fireproof box in house, where to access

• Where are estate documents, insurance policies

• Items of personal property

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Document as much as possible

• Complete a financial inventory checklist

• Passwords

• Existing advisors – Insurance, investments, attorney and financial planner

• Keep all documents in one place – just in case binder

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Talk about your legacy

• How do you want to be remembered by your family

• Charitable intentions

• Important values

• Family tree – genealogy

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References

• Protecting Your Children by Protecting Their Inheritance; http://winbladlaw.com/?p=1407

• Americans’ Ostrich Approach to Estate Planning; http://www.forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-

estate-planning/#3a9229cef07b

• Call a Family Meeting; Wells Fargo Conversations; https://conversations.wfmagazines.com/article/call_a_family_meeting

• A Closer Look, Family Meetings – An Important Strategy for Preserving Wealth; Donna Trammel, Director of Family Wealth Stewardship;

http://www.bessemertrust.com/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/Public/Published/Public

EmailImages/PDFs/BessemerTrust_A%20Closer%20Look_Family%20Meetings_06.2015.pdf

• New Report Predicts U.S. Wealth Transfer of $59 Trillion, With $6.3 Trillion in Charitable Bequests, from 2007-2061; Boston College Center

on Wealth and Philanthropy; www.bc.edu/cwp

• https://www.estateplanning.com/estate-planning-family-meeting/

• http://purposefulplanninginstitute.com/philanthropy.html

• http://static1.squarespace.com/static/5575d2cae4b0992cf8978611/t/559c1e4de4b03f35d5a19ffe/1436294733791/What+Matters-

+article-web.pdf

Hoover Financial Advisors, PC112 Moores Road, Suite 100

Malvern, PA 19355Phone: 610-651-2777

Fax: 610-651-2797www.petehoover.com

We look forward to working with you!

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