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May 19, 2010
11:30 am to 1:30 pm
Heritage Planning: Preparing Heirs so they Control the Inheritance Instead of the Inheritance Controlling Them!

June 17, 2010
11:30 am to 1:30 pm
Planning Your Exit Strategy? Why your Banker Needs a Seat at the Planning Table!

September 21, 2010
11:30 am to 1:30 pm
Positioning Your Business to Maximize Value -- Keys to a Successful Third Party Sale

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Sept. 1, 2010
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You Made These Trusts Because
You Don’t Trust Me

William M. Eck, CWC Principal,
True North Connections, LLC

Guest Lecturer
May 19, 2010

Click Here for Details

Many estate owners establish restrictive trusts in the attempt, after they are gone, to control and channel their heirs’ behavior.  William M. Eck offers a different perspective:  by providing heirs with pre-inheritance experiences and training over a pool of assets during the estate owner’s life, the heirs can be encouraged to develop the skills and motivation needed to create and implement their unique family vision, thereby offering them the best chance at attaining success in their lives.

From a young adult who has just learned that the inheritance he was expecting is going to have more than a few strings attached:

“Wow, mom and dad!  It was nice of you to create a financial inheritance for me through your trusts.  Thank you.  But, what’s with all the restrictions, limitations and barriers?   I know I’m not perfect but, don’t you trust me?  I’m 39–can’t you treat me like an adult?  Can’t we communicate adult to adult, instead of parent to child?  When will you listen to me and allow me to share what I want, rather than trying to control me for what you want?  These trusts make it look like you want to continue controlling me from the grave!  How about letting me buy into what you want, rather than forcing it on me?  OK, so maybe I have to work on gaining your trust, and sure, I might need to change my ways, but will you let me, support me, listen to me, allow me?  I don’t see the world the way you do.  I haven’t had the same experiences.  How about it–will you give me the opportunity?”

I had been attending a workshop on planning for your family. We had just been asked, “How do you want things to be with your family, fifty years from now?” The answers were interesting as they had nothing to do with leveraging assets, avoiding taxes or transferring as much as possible to the next generation or two.  “I want my family to be there for each other”, some said, “I want lots of grandchildren who know and support each other”, replied others, and I also overheard remarks like, “I want them to be good examples of moral character”, and  “For them to have a peaceful world to live in” and “I just want them to be successful”. 

“Successful.” The magic word. How did the group define success?  The responses included being happy…comfortable…debt-free…achieving what they pursue…fulfilling their inborn talents and dreams…being a kind and useful person…and having a loving marriage and family.   No one said rich, wealthy nor have a big inheritance.

Next, we were asked, “What difference will it make to you and your life knowing you have done everything you could do to see this dream turned into reality for your family?”  My fellow attendees gave answers that talked about peace of mind…relief from worry…a sense of real fulfillment…personal satisfaction that I did a good job…tranquility…seeing my mission on earth achieved…and leaving a real legacy.

Then came the stem-winder, a question that put it all in perspective:  What specific provisions in your current estate and financial planning will help you get what you just described for your family in the future?  There was silence in the room.  That was not the question any of us had expected.  The truth is, none of us could answer it, because we had never considered planning to be the place where such questions were addressed.  Yet, once the estate planning is complete, we think we are done.

Another intriguing conversation was taking place in an unlikely venue–a presentation titled “Recent Trends in GRAT Planning”.  It provided a lot of technical information on the complexities of how this tool would be beneficial in the current economic situation. The lawyer to my left kept turning and pointing out things like “possible ways to cap the amount passing to children” and “language expressing grantor’s intent to limit the amount to children”.  The attorney on my right pointed out that “this must have been beyond you because you were not turning the pages and following along”.

My mind was racing.  What was the point of going through all this legal and financial planning, time and expense when what most heirs will do is spend all of their inheritance--once they have full access--if they are able?  Why not give it to them now instead of later, since the result will most likely be the same?   In most cases, it will neither be respected nor imbue heirs with the responsibility of stewardship as those who earned the wealth would wish. Why not just give it to them now instead of jumping though all the hoops?  Most of the trust work we do for our heirs, contain provisions of limitations because we do not trust those who will benefit from them.

It reminded me of how we deal with a headache.   We take some kind of pain pill.  Have we really addressed the underlying issue?  What if the headache is because I am dehydrated?   Wouldn’t it be more beneficial in the long run to drink water and deal with the real problem, rather than merely covering up the pain with medication?   How is our trust work the same?   Does the “medication” we deliver in our trusts really work?  

I am not advocating that we essentially give up, and let heirs have full access at age 18 or 21; but, how much better would it be if we could prepare the heirs for their inheritance rather than prolonging the inevitable in the hope that they will be ready?    How much faith and confidence do you have that your hope will be sufficient?

A recent comment from a trust officer offered another perspective.  He asked, “Have you ever seen an arranged marriage work?”  My reply was, “Not in this country.”  He stated, “In most cases, that is the relationship of a trustee and the beneficiaries.  It does not work very well.  There is lots of clashing.”   Should we take the medicine to mask the symptoms we are dealing with, or work on addressing the real issues instead of merely hoping to change the outcome?   A veteran financial advisor said it in another way.  She stated; “In my experience, 95% of all beneficiaries work on how they can get more money out of the trust.”

Trusts are needed. They are the answer for some specific circumstances, yet they do not accomplish what our families want, beyond the transactional nature of the inheritance.  Have you ever been at a funeral where the eulogy, testimonies and remembrance thoughts of the person mentioned the tax avoidance strategies or how much they passed on with the inheritance?   What really lasts?  Is it who they are and what they stood for,  rather than the money and assets they left?

This article is being published in the Journal of Practical Estate Planning in May, 2010.  If you would like the complete article, contact William Eck at:  bill@truenorthconnections.com or 303-432-8657.