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Putting the "Success" Back Into Succession Planning

One of the increasing challenges facing parents and other family members today is achieving success in their estate planning - passing on their wealth well. But how should we define "success". From a professional viewpoint, much of estate planning focuses on ensuring a tax and cost-efficient transition of wealth to future generations and primarily focuses on financial aspects. But in doing so, have we lost sight of the forest for the trees? What is the overarching purpose of passing on wealth? Is it just about the money?

Those planning their estates given the abundance of "affluenza" are increasingly concerned that focusing just on ways to increase the amount of wealth passed on to children and family members results in a lack of focus on the key issue of whether leaving a substantial inheritance to a child or family member is a good thing or not. As parents, we want to do the best for our children. Many are troubled that leaving a large inheritance to their children will be harmful, and even destructive - that it will decrease their self-reliance, ambition and ultimately their self-esteem if not handled correctly and without a proper plan. These concerns are not new. The great industrialist and philanthropist Andrew Carnegie said at the beginning of the 20th Century:

Why should men leave great fortunes to their children? If it is from affection, then it is misguided affection because great sums bequeathed often work more for the injury then the good of the recipients.

The modern day financial prophet Warren Buffett is well-known for subscribing to a similar view, and he along with Bill Gates have propounded the Buffett-Gates Giving Pledge which has resulted in scores of billionaires pledging most of their wealth to charity.

As the saying goes, it is easy to give away money, what is difficult is to give it away well. The values we pass on to our children, the education and life experiences we encourage them to have, including in order to become financially savvy and astute, are all part of this challenge. The lack of a balanced approach and the pursuit of money as an end in itself - as opposed to a means to provide opportunity for growth and to explore and enjoy all that life has to offer - is a challenge in our competitive society, which often measures success by financial achievement. We need to go back to fundamental principles and have clarity on our values in planning to pass on our wealth.

The idea of family meetings, family mission statements and a re-emphasis on values important to each family is becoming a part of the wealth planning and succession discussion. In two recent blogs, I discussed the non-financial legacy we can leave and how an ethical will can be part of passing it on Ethical Wills November 25, 2014, and the importance of financial literacy and breaking the silence on talking about money and inheritance, and preparing our children and other family members to handle and manage their inheritance The Family Wealth Conversation - Too Little, Too Late? March 1, 2017.

There is an increasing amount of literature on these topics. One of my favourites because of its clear and succinct messages is Wealth in Families by Charles Collier. Chris Clarke's new book "True Family Wealth: Love Money & an Inspired Life" provides a road map for goal-based wealth planning and drills down into the financial and non-financial meaning of wealth and its importance in achieving a fulfilling life.

As we go forward into the future, it seems there will be an increasing focus on what are sometimes dismissively termed the "soft" issues of estate planning, as opposed to the so-called "hard" issues, which deal primarily with tax minimization and financial optimization. Paradoxically, the "soft" issues are often the harder issues to solve than the "hard" issues. All which is good news, as estate planning will become more balanced and holistic, and in doing so, we will put the "success" back into succession planning.

--Margaret O'Sullivan

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal or tax advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

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