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Why Traditional Estate Planning Fails
Avoiding Failure Requires the Optimization of the Human,
Intellectual & Financial Assets Comprising "True
Wealth"
By Kenneth E. Guard
Traditional estate planning has done more to destroy American
families than the federal estate tax could ever do! There
are four reasons why typical estate planning usually fails:
1) The game played between the taxpayer and the tax-collector
becomes paramount - it isn't important what happens to the
money as long as you keep more and the government gets less;
2) The estate planning industry has created intellectual strategies
and products designed to make you believe you are winning;
3) Regardless of its complexity, traditional estate planning
has become a process of "Divide, Defer and Dump which
is wealth transfer without responsibility or accountability;
4) The division of assets (gifting) not only diminishes the
assets but actually encourages extraordinary consumption and
discourages savings. Hence, with or without estate and inheritance
taxes, with or without "traditional" estate planning,
family wealth dissipates and rarely survives three generations!
According to the Family Firm Institute of Brooklyn, Massachusetts,
"nearly 70% of all family firms fail before reaching
the 2nd generation, and 88% fail before the 3rd generation;
only a little more than 3% of all family enterprises survive
to the 4th generation and beyond." The third generation
seems to be the brittle generation. Hence, the saying, "Shirt
sleeves to shirt sleeves in three generations!" (Or in
Asia, "Rice paddy to rice paddy in three generations!").
A common misconception is that the estate tax is the cause
of this loss of wealth. Nothing could be further from the
truth. The loss of wealth occurs at the same rate in countries
with no death or estate tax, such as Australia!
One of the greatest challenges facing affluent individuals,
families and businesses is how to control, protect and empower
their human, intellectual and financial capital. As Albert
Szent-Gyorgyi once said, "Discovery consists of seeing
what everybody has seen and thinking what nobody has thought."
Rather than taking just a financial approach to estate planning,
we should also focus on the perpetuation of a family's human
and intellectual assets. In his book, Finding The Better Way,
multi-billionaire James LeVoy Sorenson said, "My family
and good health are what make me truly rich... True wealth
only comes through health and family and friends."
The Rothschilds are one of the few families who have perpetuated
their family wealth down through several generations. The
Rothschilds followed a three-part philosophy: 1) They loaned
their heirs money which their heirs had to repay; 2) The knowledge
and experiences those heirs gained had to be shared with other
family members; 3) The family gathered at least once a year
to reaffirm their virtues and intentions. Nathan Rothschild
said, "It requires a great deal of boldness and a great
deal of caution to make a great fortune; and when you have
got it, it requires ten times as much wit to keep it."
In order to make the transition
from success to significance, to create a lasting legacy for
a family, requires an understanding of "true wealth".
The "true wealth" family balance sheet hierarchy
is comprised of first, human assets (people), then intellectual
assets (knowledge) and lastly financial assets (things). The
sum of these three equals "true wealth."
Human assets enhance the individual health, happiness
and well being of each family member. They include family,
health, habits, values, virtues, unique abilities, environment,
attitude and time. Robert Frost said, "Every affluent
father wishes he knew how to give his sons the hardships
that made him rich."
Intellectual assets, when captured, are available
for the benefit of each family member. They include wisdom,
education, life experiences (both good and bad), ideas,
skills, methods, and alliances.
Financial assets ensure financial independence,
provide for family legacy and enrich political and social
involvement. They include personal financial assets (financial
independence), family financial assets (family enhancement)
and civic philanthropic financial assets (social, significance).
When individuals are asked which one of the three categories
of the family balance sheet they would bankrupt had they
no other choice, without exception, they would choose the
financial assets category. Why? Because they could rebuild
that category of assets using their human and intellectual
assets! So why do professional estate planning teams focus
primarily on the least important of the three categories,
the family balance sheet?
Kenneth Guard is a member of "The Empowered Wealth
Group", a nationwide team of professionals specializing
in the optimization of "true wealth". Their mission
is to assist affluent families in identifying their stewardship
responsibility to "true wealth" by creating unique
systems, strategies and structure for family and financial
empowerment with ongoing accountability to enrich their quality
of life without giving up choice and control. Their goal is
to help create "a new age wealth era... An era of family
leadership... An era of opportunity and accountability vs.
entitlements and inheritances."
Gaining "true wealth" is the process of capturing
intellectual assets and combining them with the capitalization
of financial assets to enrich the health, happiness and well
being of individual family members. A family's empowerment
begins with its understanding of its responsibility and stewardship
to "true wealth." The first step in the process
is to define and articulate a unique family philosophy. The
family philosophy sets forth those things most important to
the perpetuation of the family values, beliefs, goals and
purpose. Going forward with the true wealth planning process,
all facets of the estate plan are designed around the family
philosophy to promote, maintain and perpetuate the family
values, virtues, ethics, morals and belief systems to achieve
the family's intellectual, human and financial goals through
generations.
Ken Guard and his national team of specialists assist affluent
clients in structuring and implementing plans and systems
to perpetuate the family philosophy such as the "Family
Empowered Bank™" (a conceptual "bank",
not an actual chartered bank). The governance and operation
of the bank is designed around the family true wealth philosophy,
and ensures that family financial assets be used to perpetuate
family values and enhance human and intellectual assets.
When the Family Empowered Bank™ is established,
there are two entities, the private portion and the social
portion. The private portion is perpetual, offers loans and
grants to family members, enters into joint ventures with
family members, and the assets are protected and are not subjected
to estate taxes. The social portion is also perpetual. It
creates... family significance, social significance, and there
is no inheritance tax. It can make loans to family members
and others.
The Family Empowered Bank™ provides the structure
for human asset optimization with:
1) health and wellness programs,
2) family retreats,
3) philanthropic awareness and participation,
4) identification and sharing of unique abilities and talents,
accountability and responsibility, and
5) a sense of purpose and balance.
The Family Empowered Bank™ also provides the
structure for intellectual asset optimization with:
1) the capture of life's experiences,
2) the deposit of intellectual assets for the benefit of
other family members,
3) the enhancement of strategic relationships,
4) the utilization of formal education,
5) the recording of family events and accomplishments, and
6) the recognition and utilization of skills.
Finally, the Family Empowered Bank™ provides
the structure for financial asset optimization with:
1) parallel asset management,
2) proprietary wealth optimization strategies,
3) income and estate tax reduction/elimination,
4) asset protection structuring,
5) creative philanthropic strategies,
6) financial wealth accountability, and
7) responsible financial management.
Thus, family empowerment begins with identifying the hierarchy
of assets and discovering how they can work in harmony to
enrich "true wealth."
It would behoove any family to develop and utilize some type
of system designed to:
1) enhance the individual health, happiness and well-being
of each family member,
2) support and encourage family leadership,
3) capture family virtues, memories and wisdom and
4) protect, optimize and empower the family's intellectual
and financial capital.
Such a system would provide tremendous clarity, balance, focus
and confidence for the family.
For more information
on how to optimize your human, intellectual and financial
assets, visit www.investorssecurity.com
or contact Kenneth Guard via e-mail: (kguard@investorssecurity.net)
or call toll-free: 1-800-741-2890.
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