Estate Planning Archives - The Certior Group

Dr. Barnes and Scenario Planning

June 9, 2020 by Avi Kantor

Dr. Albert Barnes, a Philadelphia physician and chemist, amassed one of the world’s greatest art collections. He established The Barnes Foundation to own and display his art according to his very specific, highly idiosyncratic wishes. The Foundation was designed to function as an educational institution to teach Dr. Barnes’ principles of art. When Dr. Barnes died in a tragic car accident in 1951, The Barnes Foundation was to have continued as an art teaching institution in perpetuity. However, subsequent events undermined Dr. Barnes’ intent. Powerful monied and political interests in Philadelphia and the state of Pennsylvania, perhaps mismanagement, and inflexible trust provisions combined to shift the fate of the art collection away from Dr. Barnes’ vision. The Barnes Foundation art collection is now housed in downtown Philadelphia adjacent to the Philadelphia Museum of Art. This fact would undoubtedly have upset Dr. Barnes who publicly expressed his disdain for that institution. [1]

The former Barnes Foundation in Merion (left), The new Barnes Foundation in Philadelphia (right)

In many ways Dr. Barnes’ estate planning represented perhaps the best possible planning available at that time. Yet, despite his planning efforts and the substantial endowment that The Barnes Foundation had at the time of his death, the Foundation ultimately was not able to carry out and sustain his wishes. What went wrong? What might we learn from Dr. Barnes and The Barnes Foundation story that might help us think and plan in volatile, uncertain, and complex times?

One approach that might have helped Dr. Barnes is scenario planning. This entails a rigorous process of imaging an ideal future vision, then imaging potential scenarios that might disrupt his vision, and crafting contingency plans to avoid or address obstacles that might undermine achieving the ideal future vision. Contemporary scenario planning has been influenced by the work of Shell Oil Company. [2]

Imaging the world after the collapse of the Soviet Union, in the 1970’s Shell assembled a diverse group of thinkers, domain specialists, as well as generalists in business and management. Together, they developed a process that has since shaped much of Shell’s decision making and strategic planning. Over time, their methods have also influenced military, business, and government decision makers. Investment professionals, statisticians, and even poker players use scenario planning techniques to deal with uncertainty and multiple variables outside of one’s control.

Theatrical release poster by Neil Kellerhouse and Erik Buckham

What if Dr. Barnes had imagined circumstances in which his collection was running short of money? What if he had imagined a situation where his trustees had ulterior, selfish motives? What if he had anticipated that the art world and the City of Philadelphia would change its opinion about his collection and covet the collection? All of these things subsequently happened….and the foundation was ultimately unable to adequately deal with them. Perhaps, with the benefit of scenario planning, Dr. Barnes might have supplemented his planning documents in a way that might have given the Foundation greater flexibility and more options to sustain itself according to his deepest desires and wishes.

In many ways scenario planning is more akin to writing a novel or a piece of science fiction than it is a branch of traditional financial and estate planning. The process calls for a great deal of imagination and for a deep understanding of human behavior, human motives (both good and bad), and what is possible in a world that’s rapidly changing. It is essentially an artistic endeavor. It is also well-suited for today’s COVID-19 environment.

At a time when predictions – whether it’s regarding Covid-19, economic, political, social, psychological, or cultural impacts – can’t be based on reliable extrapolations from the past or verifiable factual information, scenario planning holds the potential for us to think, plan, and make decisions in a very uncertain environment. I believe this capability will help our clients steward their families and their True Wealth during these challenging times.

[1] “The Art of the Steal”, a documentary film by Don Argott, 2009.

[2] Shell Scenarios, https://www.shell.com/energy-and-innovation/the-energy-future/scenarios.html

What Really is Estate Planning? Part 2

February 18, 2020 by Avi Kantor

Last month, I discussed how traditional estate planning focuses on wills, trusts, and other legal, tax, and financial structures. I emphasized that such an approach has been largely unsuccessful in sustaining multi-generational wealth. I proposed that if we “Put People First”, we might better sustain wealth and help people live more happy, fulfilled, meaningful, and joyous lives.

So, how might we put people first? We’ve developed what we call a “Universal Framework”. The framework breaks planning down into four phases – Discovering, Designing, Implementing, and Stewarding. Our framework keeps people top-of-mind as we engage in ANY planning process and implement financial and legal structures. By keeping people top-of-mind during each planning phase, we believe that planning becomes more relevant and ultimately more successful. Why? Traditional estate planning often focuses on minimizing taxes by dividing money among beneficiaries and/or deferring the payment of taxes. What winds up happening is that assets get distributed to unprepared beneficiaries, only to see those assets dissipated because beneficiaries weren’t engaged in the long-term planning and strategy of the family. In other words, the plans don’t involve the beneficiaries; they are done to them. We believe that what’s missing is the participation and involvement of all family members – in other words, the people.

What might we do differently? We begin by focusing on each individual’s True Wealth – that which is most essential for each family member. Each individual family member’s clarity and awareness about their values and priorities and their vision of the future prepares them to contribute to the overall planning, implementation, and stewarding of a family’s assets.

Much like a successful sports team or a high-performing orchestra, family members need processes and structure in order to perform at their best as an organization or enterprise. Everyone participates and contributes, even if their contribution is relatively small. This notion of a “Family Enterprise” seeks to optimize the way a family functions together; that is, the enterprise seeks to optimize the people, process, and structure of the family.

To carry the metaphor of a sports team or orchestra one step further, we (The Certior Group) function much like a “conductor” or “general manager”, maintaining the flow and momentum of the planning process. We adapt our Universal Framework to collaborate with other professionals. We then focus our endeavors on keeping people top of mind as we co-create, curate, and optimize products and services for the benefit of our client families. Our role is to maintain collective focus on long-term individual and multi-generational family happiness, fulfillment, meaning, and joy. It’s our notion of what “Stewardship” is all about.

What Really is Estate Planning?

January 20, 2020 by Avi Kantor

Most lay people would probably respond “wills and trusts.” If you ask professionals who specialize in estate planning, you might get answers like “preserve and protect money and assets for future generations” or “minimizing taxes and maximizing the transfer of assets.” Both perspectives are certainly accurate. But this raises the question, “Why do we do estate planning?” In other words, what are we trying to accomplish when we do estate planning?

If we look at the typical professional approach, it boils down to maximizing the money and wealth transferred and assuming that that will best serve the people involved (i.e., the family). For this article, we’ll call this Approach #1. But if you could read people’s minds, I would speculate that what most people really want is for their family to remember and honor them by capturing and leveraging their lifetime of experiences and wisdom to help their family thrive for generations. We’ll call this Approach #2.

The statistics for Approach #1 are not encouraging. As much as 70% of family wealth is lost by the end of the 2nd generation and over 90% by the end of the third. In other words, all of documents, structures, governance, education, etc. that has historically gone into Approach #1 has resulted in a meager success rate. There’s actually a folk saying for this phenomenon – Shirtsleeves to shirtsleeves in three generations.

We believe it makes more sense to “Put People First”; to not let taxes, structures, distributions, etc. drive the estate planning process. We often see that the typical estate planning process “leaves the people behind” because it focuses and prioritizes legal documents, saving taxes, and maximizing asset transfers, etc. Instead, we believe in first building individual, self and social awareness; nurturing emotional intelligence, enhancing communication skills; and setting the conditions for collaboration (Putting the People First). THEN, utilizing the traditional tools and techniques of estate planning to enhance the outcome and serve the people, not the other way around.

Why ultimately do we put people first? In order to optimize multi-generational True Wealth; that is, to help people live happy, fulfilled, meaningful, and joyous lives.

Sustaining Multi-Generational Wealth

July 7, 2019 by Avi Kantor

Garrett Gunderson recently published a provocative article on Forbes.com entitled “How The Ultra-Rich Never Die.”

https://www.forbes.com/sites/garrettgunderson/2019/06/15/how-the-ultra-rich-never-die/

The article’s premise is to invest in future heirs not in traditional investments. What Gunderson means by “invest” is to dedicate time, energy, attention, and resources towards developing the “talents, interests, abilities, and skill sets of those we choose to be the ones who will carry on and benefit from our legacy.” Gunderson’s rationale is that even if these heirs do not grow their inherited financial assets, life insurance can replenish those assets, freeing the heirs to grow as people and contribute to the world. He also touches on core values, traditions, rituals, family retreats, and mission statements. His concluding remark is “invest in people, not products.”

I applaud his focus on people. Traditional multi-generational planning has tended to emphasize legal structures and financial strategies, often to the detriment of the people involved.

Yet, Gunderson’s either/or thinking – that one should “invest” in people, not products – strikes me as somewhat misleading. Shouldn’t it be people AND investments? Without informed wealth management, focusing exclusively on people can become a prescription for undisciplined self-indulgence and waste. True Wealth involves optimizing financial assets to support people and their quest for happiness, joy, fulfillment, and meaning.

“We ultimately ‘live our legacies.’ That is, if we live our lives with high moral and ethical character, we positively influence those around us and the culture of our families. A family culture of high moral and ethical character ultimately will determine if the assets ‘never die.'”

When I look at the challenges of multi-generational True Wealth, I see the opportunity to help family members align around a larger common vision and purpose. In my experience, this means developing leadership character and family culture. As Gunderson suggests, expressing core values, traditions, rituals, retreats, and mission statements are important and necessary. However, these tend to be about external behaviors. I see character and culture as largely internal and about mindset. And I believe that mindset matters.

Finally, when Gunderson says the “Ultra-Rich Never Die”, he means that the assets of the “Ultra-Rich” wealth creators won’t “die” if his or her heirs are well-versed in core values, traditions, rituals, retreats, and mission statements…and buy life insurance. This can be a great overall strategy for some families. In fact, many multi-generational families successfully employ this strategy. I would add that we ultimately “live our legacies.” That is, if we live our lives with high moral and ethical character, we positively influence those around us and the culture of our families. A family culture of high moral and ethical character ultimately will determine if the assets “never die.”

Creating a Lasting Legacy

June 7, 2019 by Avi Kantor

When estate planners talk about creating and leaving a lasting legacy, they usually are referring to investment strategies and legal structures. These strategies and structures recognize the wishes of the wealth creator, protect assets from creditors and lawsuits, and encourage future family philanthropy. Successful wealth creators often want to create and leave a lasting legacy; they would like to be remembered for their success. Often they have strong opinions about what inheritors should think, believe, and do with their lives. Planning documents and wealth preservation strategies generally reflect these opinions and the values of the wealth creators, not necessarily those of the wealth inheritors.

Do these legal and investment activities, in fact, lead to a lasting legacy? The statistics aren’t encouraging. Studies indicate that an extremely high percentage of family wealth is dissipated by the end of three generations. From my perspective, the reality that most legacy plans exclusively reflect the thinking of the wealth creators works against their vision for a lasting legacy.

What’s missing? Many planners focus on philanthropy as a means for sustaining families. Philanthropy can be a catalyst for discussions on family values, family history, and the vision that family leaders have for the future. Done thoughtfully, philanthropic efforts can create a rallying point and become a source of pride for a well-intentioned family. But there are other reasons people donate. Many donate primarily for tax purposes. Others want the recognition that often comes with large donations. I’ve even heard of people who donate so that they can be invited to the “best parties” that are frequently associated with charitable fundraising.

One of our collaborators says that we don’t really leave a legacy…we LIVE our legacies. To me, this means that the way we live each day creates a legacy – positive or negative – over our lifetimes. I’ve observed that families that are intentional about living their values – that is, discussing and acting upon their visions and ideas about what their best lives can and should be – these families develop leadership character and culture among family members. The ability to nurture and grow strong family leadership and a positive, sustainable family culture is, in my opinion, what’s missing in estate planning today. Wealth creators would be better-served if, in addition to great strategies and structures, they could develop a process for the ongoing development and contributions of current and future family members.

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