A Parable About a Family Business – Pt. I

family-business

It all started out as an idea….

In the beginning there was a great business idea.  When the business started out it was small.  The owner was determined, diligent and talented.  The business grew.

After some time it was a much larger business and had many employees under its roof.    The owner’s children were now grown and some decided to work in the business.  The other children did not, choosing to find their own paths in life.

Soon there were issues, mainly disagreements over what to do with the profits.  The inactive owners wanted to be paid dividends… now!  The active owners saw the need to reinvest profits back into the business for future growth.

The founder was ready to retire.  But there was little savings or liquidity outside the business.  The founder wanted to be conservative and protect the cash flow for himself.  The sons and daughters working in the business wanted to be more aggressive and grow the business to remain competitive.

There was no way for the inactive owners to sell their ownership.  They wanted high dividends to make up for the lack of liquidity.

Without warning one of the owners died suddenly from a unforeseen medical condition.  The owner’s grieving spouse wanted to be bought out immediately.  The business had to borrow money from the bank to repurchase the outstanding shares.

The tensions of keeping the business afloat continued to increase and one of the owners kept bringing the stress home.  Soon there was a divorce.  This event caused a small financial emergency for the business.  Soon there was a demand for more money.  A loan was made to the divorced owner.

Another owner had a gambling problem.  But it was discovered and addressed too late; there were too many credit card bills.  A bankruptcy was filed.  More money was need.  Another loan was made.

The family members stopped taking to each other; there were too many hurt feelings and too much mistrust.

The inactive owners still wanted their dividends, now!  They didn’t understand the internal operations of the business.  No one had explained to them the need to leave the money in the business for it to be competitive in the market.

The founder had never decided who was going to take his place.  It was left up to a committee when he died.  The estate tax bill arrived in the mail.  There had been no planning.  There was no cash or lines of credit available.

There was an auction.  The assets were sold.  The business is gone.  The End.

This is a sad, sad story.  But unfortunately it happens… over and over again.  Does any of this story sound similar or familiar to events or conditions within your family business?  Please don’t let this happen to your family.  We have many tools and procedures to prevent this parable’s effect taking hold within your family business.

*****

Donald L. West, Jr., JD, CTLP,  serves as the Associate Director of Education to the Legacy Institute, is a Chartered Legacy & Trusts Planner, a Personne De Confiance, the Creator of the Legacy Pyramid and co-author of A Step-By-Step Guide To Crafting Personal Legacy Statements.

The Legacy Institute, (A.I.L.E.P.), is an organization devoted to empowering families and closely-held business entities cultivate multi-generational connectedness, growth and prosperity.

Advertisements

What is an Estate?

Everything you own constitutes your estate.

Everything you own constitutes your estate.

There is a common misbelief that “estates” are something that only the rich and famous possess. This misconception is possible because most people have no idea what constitutes an estate to begin with. On TV and in the movies the term estate is only used to describe or reference the rich and the wealthy, often describing huge lavish property and elegant decorations. In fact, any property, no matter how small or large, humble or extravagant is part of an estate. Land, condos, duplexes, townhomes, apartments and the single family home all make up people’s estates.

Simply put, an estate is everything that a person owns. It includes your favorite guitar, your collection of family photographs, your residence, cash, stocks, bonds, and other investments, retirement plans and businesses you own. If you are a creator, your estate includes all your works, including your paintings, drawings, prints, manuscripts, copyrights, trademarks and patents. For estate tax purposes, your estate also includes all life insurance policies in your name as well as your IRA’s or other retirement accounts. So again, your estate includes everything that you own, this includes all of your personal property, such as vehicles, jewelry, collectables and other treasured items.

Your estate is everything that you own. You own things, so congratulations… you have an estate.

*****

Donald L. West, Jr., JD, CTLP,  serves as the Associate Director of Education to the Legacy Institute, is a Chartered Legacy & Trusts Planner, a Personne De Confiance, the Creator of the Legacy Pyramid and co-author of A Step-By-Step Guide To Crafting Personal Legacy Statements.

The Legacy Institute, (A.I.L.E.P.), is an organization devoted to empowering families and closely-held business entities cultivate multi-generational connectedness, growth and prosperity.

5 Tips for Donors to Non-Profit Organizations – Due Diligence of a 501(C)3 Organization

Most of us value our money, due in no small part to the understanding of what was done to earn it. Yet when it comes to giving our money away to charitable organizations even the wealthiest and most generous donors among us often fail to apply the same level of due diligence typically applied on a routine basis to most business transactions. Acknowledging this fact in an article for Forbes.com, Betsy Brill, a planned-giving consultant, noted:

Over two-thirds of wealthy households surveyed for Bank of America’s 2010 study of high net worth philanthropy reported that they give to organizations when they believe their gift will make a difference and when they know the organization is efficient in its use of donations. However, a much smaller percentage of donors actually conduct the extensive research necessary to accurately make these determinations. For example, another 2010 donor survey–this one by nonprofit consultancy Russ Reid–showed that only one-third of donors actually talked to an organization’s staff before making a gift, and only one-quarter visited the organization in person or reviewed its annual report.

The non-profit sector has been impacted by the downturned global economy and despite heavy regulation and oversight; scandals and abuses grab headlines regularly making it incumbent upon the fiscally wise donor to follow these five best practice tips when vetting your next philanthropic beneficiary. There are lots of choices out there for most causes and new organizations are being formed every day. Making use of these five tips will place you among the philanthropic elite, those who are confident that they are investing and partnering with organizations that are effectively governed, transparent, accountable, fiscally responsible and aligned with their core values.

1 – Evaluate the Organization’s Mission. Every charitable organization has a mission and purpose for its existence. A large number of donors have expressed a strong preference for giving to causes that they themselves have an interest in or passion for. The logical first step is to review the mission and purpose of the organization you are considering or seeking one whose mission matches your interest(s) and passion(s).

2 – Review the programs and services the organization provides. It is important to see if the services and programs align with the organizations mission. Some donors may be interested in the types of programs and services offered. Ask if there are any tools in place to measure programming effectiveness or impact and request to see the most recent results. An actual on-site visit provides an opportunity to meet and observe the administrative staff and effectiveness of the programs and services.

3 – Confirm the Organizations Tax Exempt Status. If your donation is somehow connected or motivated by the tax benefit of a deductible gift you are advised to confirm the active status of the organization’s IRS Tax Exempt Status. For the IRS they have a public search portal located at:  http://apps.irs.gov/app/eos/.

4 – Review the Organization’s Annual Report. A great deal of insight and information may be gained from the annual report. Prior to making any significant securities acquisition the prudent investor typically reviews the annual report of the company in question evaluating certain indicators. Why then should we treat our philanthropic investments and partnerships any differently? Ask the organization for last year’s annual report or ask for the last couple of years for your review. There should be a goldmine of information regarding the organization’s operations, achievements and activities.

5 – Review the Organization’s most recent Form 990. Every tax-exempt organization is required to file a Form 990 annually with the IRS. The Form 990 contains all the information that the IRS requires and provides a quick snapshot of the organization’s full operation. When reviewed in conjunction to the annual report a well-rounded understanding may be developed of the operational structure, financial health and the programming activities of your targeted non-profit.

If an organization’s use of funds is an issue or concern for you and your gift, you may desire to add a review of the organization’s last Financial Audit. It will deliver a more complete picture and share a more precise insight into the financial operations of the organization. Lastly, if you are considering more than a simple one time gift and are truly seeking to build a long-term relationship with an organization ask if there is a strategic plan and a fundraising plan, and if you may review them. You may also seek to review the organization’s investment policy to insure the long term vision and strategies align with meaning and purposes of your gift.

Four Building Blocks for Your Legacy Plan

By: Don West, Jr., @DonWestJr

To Will or Not to Will?

Probably because June is National Make-A-Will Month, (promoted by LegalZoom, and brilliant for our industry and the families we serve), I have been entertaining the question,

Is estate planning just having a Will?

Certainly for centuries, possibly for millenia, a Will has been about the only practical tool available for those interested in multi-generational strategic planning and wealth transfer. With regards to estate planning today, the field has grown to be one of the most technically demanding and comprehensive areas of the law. With the growth of the field there are now dozens upon dozens of tools and instruments to assist and customize your estate planning goals.

Because estate planning embodies actions associated and tied to your hopes, dreams and concerns for yourself and for your loved ones there are many examples throughout history that show the use of Wills & Trusts to deal with personal property all the way back to the Roman empire. Additionally, Wills are functionally spoken of in the Old Testament (in Genesis 48), where Jacob bequeaths to his son Joseph, a portion of his inheritance, double to that of his brethren. Personal trust law developed in England at the time of the Crusades, during the 12th and 13th centuries. So you may be asking, what about my Spiritual or Intangible Estate, those intangible things that truly matter, the stories and ideas that uniquely make me, me? That is what Legacy Planning is all about.

What is Legacy Planning?

Legacy Planning is a compliment to the estate planning process and focuses on the intangible assets a person or family posses. In short, Legacy Planning deals with gifts from the Soul. A critical element in the generation of a legacy is the ability to maintain a tangible presence beyond the actual span of one’s lifetime. While physical assets may be deemed a component of a person’s ultimate legacy, the focus on family or institutional history, values and the stories that define us dictates that every individual, family and entity can be enriched through implementing a strategic legacy plan.

It must be pointed out that the requirements of Legacy Planning place you on an inward spiritual journey. As such, comprehensive Legacy Planning is not for everyone, however, the four tools we discuss here can be utilized by any one who is seeking to improve their processes and development.

So let’s jump right in, here is a quick introduction to the Four Building Blocks of a Basic Personal Legacy Plan. They are:

#1 – Definitive Chief Aim, Purpose and/or Vision;
#2 – Personal Mission Statement;
#3 – Personal Legacy Statement; and,
#4 – Strategic Life Plan

Definitive Chief Aim, Purpose and/or Vision

Success requires a concentration of effort. Most people disperse their energies over too many things and so fail to develop to be outstanding in anything. In the words of new age thought pioneer Orison Swett Marden,

“The world does not demand that you be a lawyer, minister, doctor, farmer, scientist, or merchant; it does not dictate what you shall do, but it does require that you be a master in whatever you undertake.”

So to be successful, one must align their energy with their higher aims and goals and industriously pursue their realization.

Personal Mission Statement

Is a series of guiding principles strategically developed to guide both your daily and major life decisions. Best-Selling author and productivity-entrepreneur Stephen R. Covey is a pioneer in the area of Personal Mission Statements, here he is with concise guidance on how to develop your own:

If you are ready to get started on your personal mission statement, Covey’s company, FranklinCovey, offers an excellent free online tool.

Personal Legacy StatementAllows you to articulate what is closest to your heart. It creates a record of the messages and information to valuable too be lost and captures your reflections for the benefit of others as a timeless gift to future generations. Tim Morrison and I put together this resource to assist with crafting your Legacy Statement:


Synopsis:

Decades from now, when your grandchildren peak to their grandchildren about you, what would you like them to share? Are there family traditions that you hold dear and hope that they continue for generations to come? How will future generations learn the origins and importance of those traditions? A Step-by-Step Guide to Crafting Personal Legacy Statements helps you identify and generate responses to these questions and more. This is not a “how-to” book for writing a life story or family history, but a dynamic tool for sharing a legacy, your or your family’s legacy. Who and what have shaped your life? What do you value most? What do you want future generations to remember about you? A Step-by-Step Guide to Crafting Personal Legacy Statements enables you to create powerful personalized messages to be shared at the time of your choosing during your life or after your time has passed.

Strategic Life Plan

Puts purpose and direction with quantifiable goals and objectives tied to your personal mission statement. This plan allows you to dream your perfect future and then develop the steps to actually achieve your desires. Blogger and Publishing guru Michael Hyatt has excellent free tool for Creating Your Personal Life P lan:


*****

Don West, Jr.

is a Personne De Confiance, the Creator of the Legacy Pyramid and co-author of A Step-By-Step Guide To Crafting Personal Legacy Statements. Don serves as the Associate Director of Education to the Legacy Institute and assists the NFL’s Ricky Williams and other professional athletes plan and execute their second-careers and Personal Legacies.

To Will or Not To Will?

June is National Make-A-Will Month

By: Don West, Jr., @DonWestJr
 

 

Why do people write wills?

 

Is it because they have realized the multi-generational connection between themselves and their families? Every person is unique and will have their own motivations for laying plans that reach beyond this mortal walk. Perhaps they desire that no one in their family get a dime and want to leave it all to charity? Whatever the motivation for you, reports state that only 30% of Americans have taken the time to put their wishes down in writing. That is only 3 out of 10 people. Are you 1 of the 7 who have not made written plans for the future? What would it take for you to get a written plan in place by the end of this month? Would that be something of value to you and your family? If you are 1 of the 3 out of 10 who do have a written plan, when was the last time you checked it for accuracy? Is it time for a tune-up?

 

What exactly is a Will?

 

A Will or Last Will & Testament is a legal document usually requiring the signatures of witnesses and outlines the final distribution of your property and possessions, designating your wishes for who takes responsibility for your minor children and/or disabled dependents on the event of your passing, as well as other issues you desire to address.

 

Should everyone have a Will?

 

Not necessarily. I will is an often used tool, but there are a few things to consider when choosing if a will is right for your situation. A Will requires a process called Probate, which takes place in a Court and all the documents are public records. As you may recall was the case with Michael Jackson, his mother had to go to Court and ask permission to spend money and ultimately we all got to read and see what MJ did with his earthly wealth. Is Probate the only option? There are many ways that you can execute your plans, one of the most popular and well known after the will is Revocable Living Trust or Living Trust for short.

 

The Living Trust has its own distinguishing attributes including that it does not require Probate to transfer your property and it is intended to keep your instructions private and shielded from the public record. Before jumping into the deep-end of the Living Trust ‘pool’ you should understand that all your property that has a title must be transferred to the Living Trust and no longer be held in your name. A seasoned adviser can answer your questions and help you determine if a will or a trust is right for you.

 

What about my stories and our family history, do they go in a will or a trust?

 

Both a Will and a Living Trust are legal documents are are only intended to handle the disposition of your tangible possessions. However, if you engage the services of a Legacy Specialist such as myself, we also provide tools and resources that allow for the orderly accumulation and preservation of what may be your most valuable assets – your thoughts, processes and opinions. Your interesting point of view is currently 1 in 7 billion and that makes yours priceless and invaluable if you choose to organize, preserve and share it. Your life has a story and that story is a part of your legacy. Every life is a legacy.

 

 

Who needs a written plan?

 

Almost everyone can benefit from having a written Legacy & Estate Plan. If you own things or have minor children something must happen when you transition, there is no way to avoid this absolute of life. Take control and responsibility today, it is very important.

 

Have a question, just ask. So, do you have an up-to-date written plan?

 

LET’s GET STARTED TODAY

 

Don West, Jr.

is the Creator of the Legacy Pyramid and counsels individuals, families and organizations on the subject of Legacy Development & Preservation. Don serves as the Associate Director of Education to the Legacy Institute and assists the NFL’s Ricky Williams and other professional athletes plan and execute their second-careers and Personal Legacies.

 

Every Person and Family Has a Story

Image

 

Yes, every life is a legacy.  The lessons you learn need to be passed to future generations to provide optimal success.  Let us help you share your story and pave the way to your unique legacy of love, health, happiness & wealth.  You will surprise yourself!

CONTACT US FOR A FREE CONSULTATION.

info@legacy-institute.org

EP-Article: A Candidate’s Tax Return Shows Estate Planning

US Presidential candidate Mitt Romney tax returns show that his family has taken the opportunity to organize and plan for their future generations.  Wonder if their family has a Legacy Plan or a written 100-Year Plan?   You can read this article to see what his tax returns reveal:

American Academy of Estate Planning Attorneys Blog http://www.aaepa.com/blog/2012/01/candidates-tax-return-shows-estate-planning/