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5 Smart Ways to Grow Assets for Kids or Grandchildren
June 9, 2022
If you’re a family business owner, try this visualization exercise:
First, imagine that your company’s succession strategy — whether you transferred it to the next generation or to outside owners — has gone very smoothly. You feel great!
Now, it’s the first Monday of your new life. What are you doing? Who are you with? Where are you? What do you look forward to doing?
Aspiriant Chief Client Officer Sandi Bragar has written about the intellectual versus the emotional side of money. And this concept couldn’t apply more to family business owners who either built or continued a successful family business. You’ve given your all to this company — consuming a large chunk of your time, energy and heart over the years. So while a mix of emotions can emerge, it’s common that a little fear is one of them — fear of losing control, financial security, not being relevant, or the sheer complexity of the work that needs to be done.
We’ve shared how to handle the intellectual side of family business succession considerations. But how will you feel fulfilled after the family business? We believe that envisioning your ideal transition is a four-step process:
Here are some examples of what each of those steps could look like:
The sooner you start thinking about what you’d like your personal life to be like after the transition, the easier and more effective your planning for the succession event will be.
Bud Smith, an attorney at the DeWitt Law Firm in Madison, Wisc., recently shared a story of a 70-year-old owner of a retail business that is a good example of how hard it can be to start the planning process, despite obvious circumstances that would benefit from envisioning a productive succession. The owner is in a third marriage and has five children from previous marriages, one of whom runs the business. The others aren’t (and don’t want to be) involved at all. Despite the owner being on the cusp of stepping down, succession planning has not begun because the complex family dynamics are overwhelming. The owner might find inspiration to start planning by envisioning either the ideal family dynamic they are hoping to achieve post-transition, or possibly by envisioning the likely disharmony that could exist by not acting at all.
The key is to start small with the introspective thoughts of your personal values and goals. Understanding your “why” will motivate your decisions. It is likely that you’ve developed a vision or set of core values for your company. We believe it’s extremely valuable to do this for yourself, as well.
It may look like:
Discuss your vision with the important members of your family to be sure your goals align with theirs and then identify steps on an action path.
Your company probably has a business objective and remaining aligned to that has been key to the company’s success. Likewise, if you’ve done philanthropy work, you are probably familiar with the organization’s mission statement to be sure the central cause is fully supported.
Similarly, a personal mission statement creates clarity of your purpose, vision, values and goals. It provides a reference point to assess your accomplishments and discourages drift from your primary objectives. And it connects you to what matters most.
We find that putting your personal mission statement into words can strengthen your connection to it. Components can include relevant family history, guiding principles, specific areas of interest and desired outcomes of your personal goals.
It might look something like:
To be a leader in my community by sharing my expertise, knowledge and gifts; to strive to inspire others, learn from others, and to leave my community a better place for the next generation.
Younger generations could benefit from your personal mission statement. And it will help make sure your future plans are compatible with the business’s future.
Now use your mission statement as the road map for where you would like to go and what you want to do next. It can help you allocate your time and resources. It will also influence decisions you make within the company and surrounding business succession.
We had one client in their mid-60s who co-owned a business with siblings and cousins. The owner’s two sons worked in the business, and he hoped that one son would want to become the next president. But neither was yet qualified to assume leadership.
The company’s board encouraged the owner to develop a five-year plan. It forced him to focus on the vision for his own personal future in parallel with business planning. The five-year plan to transition from the company included mentoring and preparing one of the sons to take on a leadership role.
Once the owner felt comfortable with the action plan for preparing the son to assume leadership of the company, the owner felt free to devote time to visioning his life post-transition. He started by sitting down with their spouse to talk about how they wanted to spend their time after the transition, ensuring the activities aligned with their values and mission.
Now that you’ve set your vision for life after the company, how do you get started? What’s the long-term impact you’re hoping for?
We suggest starting by setting practical, achievable goals that align with your values. Then focus on a specific purpose or project. Maybe that’s serving on a charity board for an organization that supports a cause you care about. Or you want to mentor younger generations of your family or other young leaders in your community.
Consider the legacy you want to leave and whether you can fulfill your mission through estate planning. One older client retired years ago and his family is successfully running the business. His new goal was to help a director at his church attend seminary and become a pastor.
Unfortunately, he had a limited life expectancy because of a terminal illness. After consulting with his legal and financial advisor, he set up a charitable remainder trust (CRT), which provided annual payments to the church director for four years to attend seminary. Any balance remaining in the trust at the end of the term went to charity. This estate planning technique gave the retired business owner great joy, not because of the tax advantages, but because it tied to his personal values and mission.
Another option might be to create a family foundation, whereby younger generations can gain experience and management skills from running the foundation that could be transferrable to running the family business someday.
Every year, take a few moments to reflect on your most fulfilling activities and celebrate your biggest or favorite achievements with friends and family. If you’re feeling thrown off-course, then revisit your mission and refocus on achievable goals.
When people seek our advice as financial advisors, they look to us to guide them through the intellectual side of money. We can run the numbers, set up estate planning structures, and help you find other professionals to make the transition seamless.
But before anyone can truly provide the best financial plan, the first question is, “What is the money for?” That is not a question we can answer. Only you can answer that. It starts by simply talking with the family about what you all see for your futures. By following the four-step visioning process, you can arrive at the ideal life after the family business.
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