I give a lot of speeches. Some are more technical, focused on tax saving tools (what I call the “head” side of my estate planning law practice). Others are aimed at passing down a meaningful legacy to next generations (what I call the “heart” side of my work). I recently had the privilege of giving one of those “heart” speeches at a Dallas Foundation program. My speech was entitled “How to Avoid ‘Shirtsleeves to Shirtsleeves in 3 Generations’ – A F.A.S.T. Solution to Legacy Planning.” [Click HERE to read the PowerPoint.]
In promoting the speech, the Dallas Foundation summed up my topic: “For many families, passing wealth from one generation to the next is about much more than financial assets. It’s about preparing the next generation, preserving family values, and thinking intentionally about a legacy the family hopes to create. Drawing on his experience in estate planning and family succession, Marvin will explore how thoughtful planning can help families prepare heirs for the inheritance coming their way.” Indeed, with more than $110 trillion of wealth soon to pass to the next generation, my goal was to share practical tips and improve the odds of wealth passing into hands that are prepared to receive it.
We have all seen horror stories of an inheritance passing into unprepared hands. In those cases, the money can do more harm than good. It can also lead to family feuds and strife. Many families are struggling with questions like these:
- “To what end have I created this wealth?”
- “How much should I leave my kids?”
- “How can I pass down not just valuables, but also values?”
Shockingly, 90% of families fall victim to the “Shirtsleeves to Shirtsleeves” proverb. One practical tip from the “head” side is to leave an inheritance to a Dynasty Trust so that it’s protected from creditors, divorces, and estate taxes. For retirement assets, I recommend leaving them to a Retirement Accumulation Trust for the benefit of your children. From the “heart” side, I described my Top Ten Tips from the 10% who beat the odds, as revealed on the below slide:
As the title to my presentation indicates, there is a “F.A.S.T.” solution—it’s a Family Advancement Sustainability Trust. In a nutshell, the F.A.S.T. Trust is a separate trust in the estate that doesn’t make distributions to beneficiaries. Instead, it pays for family enrichment activities such as family retreats, family travel, preserving family heritage, and maintaining the family’s legacy real estate. The optimal estate plan leaves heirs three inheritances: a traditional inheritance to provide for their needs, a philanthropic inheritance like a Family Foundation or Donor Advised Fund to provide for causes meaningful to the family, and a F.A.S.T. Trust to help preserve family unity and connection.
The best recap of my speech came from my friend Christopher Holtby of Wealth Advisors Trust Company: “An estate plan is a stack of paper; technically correct and likely emotionally wrong. I sat in on a presentation earlier this week by Marvin Blum (nationally recognized estate attorney) and a friend of mine. Over 50 years of experience has shown him that the estate plan has to satisfy the head AND the heart. The tax work can be flawless, and the family still comes apart. His number: only about ten percent of families thrive into the third generation and beyond (e.g., shirtsleeves to shirtsleeves). The ones that make it are the ones that kept talking. So the question is not only who gets the valuables, but who gets the values.”
Holtby concludes: “A legacy letter does some of the work. Lessons learned, in the parents’ own words, in a drawer next to the trust. Maybe create a [F.A.S.T.] trust to keep the family vacations going and to keep talking. It funds family meetings and education, and it names the people responsible for making those meetings actually happen. It works at any level of wealth.” He reminds advisors that we have an important seat at the kitchen table. “Ask one family this week what they want their grandkids to know about how the money was made. What’s their ‘philosophy of family and wealth’?… Then write down what they say.”
Thanks, Christopher, for your LinkedIn post hitting the highlights of my talk. You found all the golden nuggets. And thanks to the Dallas Foundation for being such a powerful advocate for family legacy planning.
Marvin E. Blum