When planning a big trip, we instinctively think about the itinerary, what we need to pack, what time we have to leave and what we need to do between now and then to have as stress – free a break as possible. Planning based on a particular objective and singular transaction comes naturally to most of us. However, faced with the prospect of planning the journey of transitioning wealth many of us hesitate. So to help let’s start with an understanding of the current structure and ownership.
First step – an inventory of what we own and how we own it
By first understanding the nature of the assets owned and structure of ownership, it is possible to develop a plan for the future evolution and management of the wealth at hand. It is also useful to have a reference point at which to measure future progress and perhaps more, importantly, as the basis upon which you can provide your family with place to start a conversation. This is what we own and this is how we own it.
As a basis for explaining a current position this is a good place to start discussing your wealth.
Next step – ‘why?’
In contemplating, the future management of your wealth, first understanding your own feelings around being financially comfortable and your relationship to wealth is important. What are your hopes and expectations for your wealth? How would you like your wealth to be applied in the future?
Many struggle to come to terms with their wealth and the extent to which being wealthy defines who they are. How you think about your wealth is a key determinant in developing plans for subsequent transfer and ownership.
For many, of course, the question is not how they think their wealth affects them but more significantly, how they think their wealth will affect their family. In discussions with wealth owners around these concerns, the conversation often starts with anecdotes of mis-spent inheritances and the failures of friends’ children, leaving them paralysed for fear of the consequences of doing something untoward to their own offspring.
In this regard many have no touch point or firsthand experience to rely on because, many have never inherited themselves. Dennis Jaffe, a leading US family adviser, refers to “immigrants to Wealth” as a means of describing the sense of arriving in a strange place not speaking the language or having the behavioural norms to fit in.
What we do know is that ‘failure to communicate’ is the number one cause for the dissipation of family wealth through dispute or mismanagement.
So knowing your own feelings is the basis for asking others their opinion. If you have fears find ways to express them. Bearing in mind, your need to protect could be seen as a lack of trust, if the basis of your action is not explained.