Seedlings

Guest Post: The “Someones” and “Somethings” of Multi-Generational Trusts

Why a Trust?  I remember the first client who asked me that question.  I wish I could have shared this excellent piece by my dear friend and teacher, Timothy J. Belber.  With Tim's permission we are posting this piece which was originally posted on Thoughts & Commentary. 

The “Someones” and “Somethings” of Multi-Generational Trusts

by Timothy J. Belber, JD on April 20, 2011

With all the litigation around trusts, beneficiaries and trustees, the question of why bother with one in the first place surfaces loudly. Certainly, there are very smart tax and asset protection reasons for trusts. The unhappiness (read: litigation) is generally not about those things. It goes to a much deeper issue -- the human component.

Ever since the first crusader “entrusted” his bishop with his assets, trusts have centered on a very straightforward idea:

One person (the grantor) gives a second person (the trustee) something to hold for the benefit of a third person (the beneficiary).

Too often the focus is on the “something” rather than the “someones”.

We see the opportunity to act differently arising at the very first design meeting. It begins and ends with a new set of questions to be considered by the grantor and the advisors:

• How would you want to be treated if you were a beneficiary of this trust?
• What do you want the coming generations of beneficiaries to say about you and this trust?
• What are the key values and principles that you believe are critical to success in life?

Questions like these can then be translated into a document that could:

• Begin with a simple statement of purpose or faith;
• Be written in the first person;
• Sound like the voice of the grantor.

Consider this opening language from an actual multi-generational trust:

While from a legal and tax standpoint this Trust must be construed from the perspective that I am the sole “grantor,” my children and their future descendants and families should know that its creation was very much a collaboration of the mutual philosophies and ideals of my wife and partner, and myself. We have deliberated carefully on the purposes we would want this Trust to fulfill. Whether this instrument uses the singular “I” or the plural “we” when it speaks of goals, objectives or intent, I want my children and descendants to know that those expressions echo the thoughts and desires of both my wife and me.

The Trust does not exist as an end unto itself. It is merely the means by which we have chosen to share some of our wealth with our children, and eventually our future descendants. It is a framework to help our family better govern itself, and to encourage our children and their descendants to strive to be the best individuals they can be and to seek joy by living in accordance with the values expressed in this Agreement. We hope that this Trust will remind our children to discover the personal growth and satisfaction that can be realized through sharing our good fortune with those who are less fortunate. We also hope the Trustee will offer positive encouragement and assistance to each beneficiary in their quests, crises and challenges.

Perhaps more about the “someones” and less about the “somethings” in the trust equation would lead to better results.

What do you think?

Timothy J. Belber, JD
Director, Family Wealth Services
The Madison Group
tbelber@themadisongroup.com

Pencils and The Sierra Club

More Lessons from the Life of John Muir

 "God has cared for these trees, saved them from drought, disease, avalanches, and a thousand tempests and floods. But he cannot save them from fools"—John Muir

The last leg of John Muir’s "thousand-mile walk to the Gulf" took him from Gainesville (which he described as an “oasis” with many beautiful homes) to Cedar Key, Florida in five days.  On early Saturday morning, September 25, 2010, my father and I made the 60 mile drive in an hour.  Our trip made me wonder how much this portion of the Florida coastal lowlands had changed in the 143 years since John Muir first encountered the Gulf Hammocks and all of the coastal keys near Cedar Key.  What I discovered is a powerful lesson for family leaders who want to make sure their families will flourish for generations.

In his first trip to Cedar Key John Muir found the Gulf Hammocks to be a "watery and vine-tied" land where "the streams are still young."   Muir had to cross vast quantities of Red Cedar along the coastal lowlands of Levy County.  In fact the Cedar Keys took their name from the stands of junipers known as Red Cedar.

On our trip to Cedar Key last weekend the first Red Cedars we noticed were two large trees outside the Cedar Key State Museum.  This museum chronicles the visit of John Muir to Cedar Key in 1868 and the impact of German entrepreneur and pencil magnate, J. Eberhard Faber.

At age 19 Faber, who came from a family which had made its fortune manufacturing pencils, immigrated to the U.S. and opened a stationary store.  Three years later he founded the Eberhard Faber company and commenced looking for an abundant source of splinter-free wood.  In 1852 that search led him to Cedar Key, where he discovered the vast red cedar stands in Florida’s Gulf Hammock area between the Suwannee and Withlacoochee Rivers.   He bought land and timber rights, organized crews to float cedar logs to the port at Cedar Key, and then shipped those logs to the family pencil factory in Germany.   

In 1858, Faber built a slat mill directly south of Cedar Key.  He began shipping slats instead of logs which greatly improved efficiency and profitability.   The pencil industry in Cedar Key expanded rapidly and a few years later the Eagle Pencil Company built a Cedar Key facility.  These thriving enterprises were a strong inducement to the completion of a trans-Florida railway which in 1861 connected the port of Cedar Key to the East Coast port of Fernandina Beach.  Now the splinter-free slats that would become thousands of pencils could be shipped to the Atlantic and save the time and expense of a trip around the Florida Keys and up the gulf coast.

In 1862 Faber became the first person to establish a large scale pencil factory in the U.S., near the current site of the United Nations.  By the time John Muir arrived in Cedar Key in 1868 the town was booming.

As we learned in The Thousand-Mile Walk to the Gulf of Mexico John Muir was forced to spend months in Cedar Key recuperating from malaria.  He borrowed a skiff and explored the keys which dot the coast and undoubtedly saw the effects of the massive harvesting of Red Cedars.  It was here that Muir’s vision about man’s role as a steward of nature emerged. 

Muir, who was a professional forester, believed that "forestry is tree farming."   He felt you should harvest timber but always with a view to preserving the long-term viability of the forests.  Faber and the other pencil barons were intent on maximizing their profits.  The red cedar forests of the Gulf Hammocks were being harvested without any thought about regeneration of the forest. 

The story of John Muir’s emergence during the next thirty years to become perhaps the nation’s leading conservation advocate traces its roots to his battle with malaria.  Each day during his convalescence he would retreat into the forests or borrow a skiff to visit one of the nearby keys.  These reflective periods were helping to strengthen his conviction of man’s responsibility to seek to live in harmony with the environment. 

After he had regained enough strength to continue his journey, John Muir left Cedar Key in 1868 and continued his journey eventually reaching Cuba.   Realizing he was still greatly weakened from the malaria, John Muir abandoned his plans to tour South America and instead ended up in California.  He settled in a cabin inside of what we know today as Yosemite National Park.  He became a student of the geology of Yosemite and over the years he would give tours of the area to prominent politicians, business and thought leaders of his day.  Upon meeting John Muir, Ralph Waldo Emerson announced he had finally found the prophet of conservation he had been looking for.  He offered Muir a professorship at Harvard.  Muir preferred to remain in Yosemite and to use his influence for its protection. 

In 1890 John Muir was instrumental in the introduction of federal legislation to preserve Yosemite.  In 1892 he co-founded the Sierra Club and served as its first President.  He would be such a driving force behind the National Parks movement that he is called the “Father of the National Parks.”  He encouraged city dwellers to seek spiritual nourishment in nature and referred to the National Parks as “places for rest, inspiration and prayers.”

In 1898 Muir returned to Florida on a forest inspection tour.  What he saw around Cedar Key had to reaffirm his view of the importance of man’s stewardship of the forests.  Two years before John Muir returned to Cedar Key, a great hurricane had destroyed much of the town and toppled most of what remained of the red cedar forests.  The depletion of the nearby red cedar forests coupled with the destruction of the mills and factories in Cedar Key spelled doom for the pencil industry in that area.  Without the local red cedar supply, the pencil factories in New York and abroad quickly switched to reliance on Western Cedar for its pencil stock.  It took the town of Cedar Key more than seven decades to recover from the economic devastation of the town and the pencil industry. 

What had transpired in the thirty years since John Muir first left Cedar Key is a remarkable lesson about stewardship of natural resources and planning for unexpected calamities.

Surely Eberhard Faber should have anticipated the problem of depletion of the red cedar forests.  If he had studied the history of Cedar Key, he might have learned that just ten years prior to his arrival in the town a hurricane had produced a 27 foot storm surge.  Would you build your mill and factory facility on the virtually flat outermost key if you were aware of what potential destruction a hurricane could pose?  It appears Mr. Faber and the other pencil industry owners either ignored those risks or deliberately chose to exploit the local resources as rapidly as possible.  Mr. Faber died in 1882 and never knew that in another 15 years the profit center he had created in Cedar Key would be destroyed by another “big storm” with no economic justification for rebuilding it due to the depletion of the resource base.

Have you prepared for the obvious risks which could threaten both your financial capital as well as the other dimensions of your family’s wealth?  Have you looked back at least three generations to consider what you might learn from the past about what unexpected threats to your family’s well-being there might be?  Have you sought to warn future generations of your family and what risks are within your horizon of awareness?  Have you engaged in a conversation with advisors whose experiences might have let them look beyond your horizon of awareness and discover threats you haven’t even considered? Have you read books, such as Family Wealth – Keeping It in the Family, which open up a view of both the mistakes and best practices of family leaders from generations ago and share some of the knowledge and wisdom which are foundational to building a flourishing family?

“Books are the compasses and telescopes and sextants and charts which other men have prepared to help us navigate the dangerous seas of human life”--Unknown

THE ILLUSION OF FIXITY

Too much of our action is really reaction. Such doing does not flow from free and independent hearts but depends on external provocation.  It does not come from our sense of who we are and what we want to do, but from our anxious reading of how others define us—Margaret Wheatley

 

In his introduction to the book Synchronicity –The Inner Path of Leadership, Peter Senge, director of the Center for Organizational Learning at MIT’s Sloan School of Management, makes this remarkable statement:

 

“One of the great mysteries of our current state of consciousness is how we live in a world where absolutely nothing is fixed, and yet perceive a world of “fixedness.  But once we start to see reality more as it is, we realize that nothing is permanent, so how could the future be fixed?  How could we live in anything but a world of continual possibility?”

 

I think that the Illusion of Fixity, a concept I borrow from Senge, is particularly relevant to the world of trusts and trustees. 

 

Too often trusts are viewed as “fixed.”  We accept as an absolute that irrevocable means unchangeable.  Yet, reality suggests that even irrevocable trusts can be changed, either by reformation or decanting, or by what I refer to as a virtual reformation. 

 

What does it take to “change” an irrevocable trust?  Equal measures of creativity, positive energy and unity of purpose among trustees and beneficiaries will accomplish the task.

 

The Illusion of Fixity also applies to beneficiaries and trustees.  Trustees too often fail to view the beneficiaries through the lens of generativity.  Beneficiaries are prone to see the “mote” in the Trustee’s eye while failing to notice the “beam” that clouds their own vision of reality.  We can’t really understand the full dimensions of reality until we consider the possibility that we don’t fully understand our role in the trust world. 

 

Until we attain that level of self-awareness and mindfulness that allows us to escape from the gravitational pull of the Illusion of Fixity, we aren’t likely to go very far in terms of a positive trustee/beneficiary relationship.  If we choose to live inside the Illusion of Fixity we will wander in a labyrinth of fiduciary dead-end streets and blind alleys leading, from nothing to nowhere.  We won’t begin to see the potential for growth in the individuals we serve but instead will regard them as fixed and unchangeable objects, much like the illusion of the goblet in the image above.

 

Did you see the goblet or the individuals?  Is there a Beam blocking your vision?  Are you trapped in the Illusion of Fixity?

 

Choosing Generativity instead of the Illusion of Fixity allows us to visualize the potential in both ourselves and others.  When this fundamental shift of mind occurs, we no longer view ourselves or those we serve as fixed and limited.  We begin to accept the possibility that each of us is endowed with infinite potential for growth.  When we examine life through the lens of generativity positive change becomes as wondrous as the unfolding of the Morning Glory in the first rays of daylight—John A. Warnick

Climbing Higher on the Ladder of Listening

The greatest gift we can offer each other is the framework in which to think for ourselves—Nancy Kline, author of Time to Think and most recently More Time to Think

 

In the prior Seedlings’s blog we talked about the first rungs on the Ladder of Listening: hearing and listening for content or substance.

 

Further up the ladder of listening we reach the rung of Empathic Listening.  If you ever attend a marriage enrichment retreat you will no doubt spend considerable time honing your skills as an empathic listener.  This is listening where we reflect, in a positive and affirming way, what we believe we have heard. 

 

The pure intent behind Empathic Listening is to insure we have not just heard but have listened to the person who is communicating with us.  We strip out our natural defensive reflexes.  We lay aside judgment.  We control our fear of silence.  We suppress any impulse to interrupt or to finish a sentence for our friend or family member.  We find the inner strength to concentrate, in a spirit of love and compassion, on the words, the tone, and other subtle indicators of emotion such as facial expressions and body language.

 

My friend and mentor, Courtney Pullen, has taught me there is yet another rung on the Ladder of Listening he calls “Essential Intent.”  He notes that beneath and inside our communication there is something essential; often at the core there is a purpose of concern that isn’t spoken and therefore is not being heard or listened to.  When individuals perceive we are aware of and sensitive to their purposes and concerns, they communicate and collaborate.

 

Nancy Kline in her books and teaching suggests that there are 10 key elements necessary to create a   thinking environment.  A dialogue can be turned into a thinking partnership when the listener applies the skills Nancy teaches us are essential for empowering the best thinking in the person we are listening to.

 

Is there a gene for becoming an empathic listener or certain natural tendencies that make it easier for some to get to the rung of “Essential Intent” or to create a Thinking Environment for their listening partner?  Regardless of your answer, I am convinced we all have innate abilities to become the type of listener which empowers other to share their deepest feelings and to do their most powerful thinking.  Thanks to people like Courtney Pullen and Nancy Kline, we have both models and written wisdom to help us begin our climb up the ladder of listening.

 

How can we get to the rung of “Essential Intent?”  What are the practices parents and grandparents can initiate which will allow their loved ones to do their best thinking and communicating?

 

Listen to me…as you would if I were talking to myself.  I am admitting you to my inmost thoughts and am having it out with myself—Seneca the Younger

The Red Corvette Story

Putting significant wealth into the hands of a young person who hasn’t been adequately coached or trained reminds me of the metaphor of the Red Corvette:


Can you imagine any parent who on his/her son’s or daughter’s sixteenth birthday would announce: 

“Happy Birthday sweetheart!!!  There is a brand new, bright red Corvette in the driveway.  I want you to have as much fun and excitement in life as you can.  I don’t have time to get you over to Driver’s Ed nor to get the car insured.  Here are the keys.  Invite your friends to go with you for the ride of their lives.  Take that red Corvette out on the freeway and see how fast you can get that ‘Vette up to.”

In a sense putting together a training and educational program for next generation family members is all about making sure that before the keys of trusteeship and control get handed over to the beneficiaries they have been prepared for that responsibility and opportunity. 

What form will that training and educational program take?  Will it be purely a text book curriculum where the beneficiary reads books, white papers, etc. and then engages in a dialogue with the trainer?  Could it also include the simulator version where the next generation family member has the opportunity for experiential learning with examples that pose potential “real-life” challenges they might face someday in the future?  Will it also involve an apprenticeship as a “shadow trustee” or “co-trustee?”

What would you recommend to your client or what are you as a parent inclined to include in your customized training and educational program for next generation family members?

The Importance of Understandable Documents

I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity—Oliver Wendell Holmes

“Why can’t lawyers just say it so people of average intelligence can understand what a will or trust means?” is a common complaint I hear when I speak to an audience of non-lawyers.  One woman, a nationally prominent author, told me she almost broke off her engagement of a highly skilled estate planning lawyer when she got the first draft of her 60 plus page trust document.  Her complaint:  the document seemed to be full of provisions that had no relevance to her situation or goals.

One of the seven secrets of the Purposeful Trust™ is:

Simplicity and Clarity

The price of tax minimization or avoidance is precisely crafted tax provisions which are often difficult for the layman to comprehend.  However, I want you to know there are ways we can help demystify the complexity and make the experience of reading the document more satisfying to both the trustmaker and those who will benefit from the transfer of wealth.

In 2001 a client who had graduated at the top of his college class and gone on to amass an incredible fortune in the business world challenged me to come up with a way to “explain” the effect of various tax clauses in a grantor retained annuity trust.  His suggestion was that I write a “plain English overview” of the tax clause and put that inside a text box that would be conveniently located above the clause itself.  This way, he explained, when his children read the trust document they would be able to understand the effect of this confusing tax language without the need for an interpreter (attorney or CPA).

I will be forever indebted to his client who taught me the value of bringing clarity into a trust or will through the use of plain English and a text box.

Do you have any other ideas on how we can make documents more understandable without sacrificing their power and tax efficiency?

Don’t Put Off Your Opportunity to Leave a Purposeful Legacy

In The Music Man, Professor Harold Hill warns: “You pile up enough tomorrows, and you’ll find you’ve collected a lot of empty yesterdays.”

I recently read the account of a man who after the passing of his wife was cleaning out her personal effects and found an unopened item of clothing she had purchased nine years earlier on a visit to the East Coast.  She apparently had been saving it for a special occasion.

The husband shared this story with a friend and concluded, “Don’t save something only for a special occasion. Every day in your life is a special occasion.”

The friend was deeply influenced by that wisdom and reported: “Now I spend more time with my family. I use crystal glasses every day. I’ll wear new clothes to go to the supermarket if I feel like it. The words ‘someday’ and ‘one day’ are fading from my vocabulary. Now I take the time to call my relatives and closest friends. I’ve called old friends to make peace over past quarrels. I tell my family members how much I love them. I try not to delay or postpone anything that could bring laughter and joy into our lives. And each morning, I say to myself that this could be a special day. Each day, each hour, each minute, is special.”

Arthur Gordon shared this story from his youth: “When I was around thirteen and my brother ten, Father had promised to take us to the circus. But at lunchtime there was a phone call; some urgent business required his attention downtown. We braced ourselves for disappointment. Then we heard him say [into the phone], ‘No, I won’t be down. It’ll have to wait.’
“When he came back to the table, Mother smiled. ‘The circus keeps coming back, you know,’ [she said].
“ ‘I know,’ said Father. ‘But childhood doesn’t.’ ” A Touch of Wonder (1974), 77–78.

Have you been putting off spending quality time with those you care the most about or expressing thanks to that mentor, teacher, or friend who made a difference in your life?

What can you be doing to leave a Purposeful Legacy to your loved ones and to make a difference in the world you will someday leave behind?

 “The bitterest tears shed over graves are for words left unsaid and deeds left undone.”-- Harriet Beecher Stowe

The Protective Power of Meaning - Part 2

The Chinese Meaning of Money

George McDonald observed that “it is by loving and not by being loved that one can come nearest to the soul of another” (George McDonald Anthology, Geoffrey Bles, London, 1970)

Everytime I read the words of George McDonald I am reminded of this powerful lesson which a Chinese-American friend of mine shared with me.  During lunch one day he surprised me with this question:  “Do you mind if I ask you some very personal questions?”

“Not at all,” I replied with a growing sense of curiosity over where this turn in the conversation was taking us.

“I’ve shared with you a little bit of my Chinese heritage and my feelings about the importance of family.  But let me ask you a few questions about how you, as an American, view money, gifts and inheritance and then I’d like to contrast that with what I was taught the Chinese view is.  So tell me, what does money mean to you?”

I was somewhat disarmed by the question.  A number of concepts raced through my mind.  “Well,” I replied, “it really can mean or represent a lot of different things.  For instance, money is a medium of exchange.  It is the way I buy goods or services.  But it also represents power and status.  On the negative or dark side it represents control and dependency.  And perhaps at the highest level it means opportunity, stewardship…”  My voice trailed off as I thought of the powerfully positive ways in which I had seen some of my wealthy clients put their money to use.

“That is such an American definition,” my friend chuckled gracefully.  “Now would you like to learn how the Chinese view the money which they receive as a gift or inheritance?” 

“Oh, yes.  Please teach me.”

“In China, when we receive an inheritance we view it as the life energy of the person who has given us that money or property, whatever it is.  It represents all of their love, toil and experiences.  In fact, in a way it not only represents the culmination of their life’s efforts but it is an extension of the opportunities, successes and sacrifices of all of their ancestors.  So when we spend some of our inheritance, it is to us as if we are spending the life energy of our ancestor(s).”

It was in that moment that I first began to understand that there is another meaning to money which could dramatically change the way inheritors and trust beneficiaries regard the wealth they receive.  Is there another paradigm around the meaning of money you can share with us?

The Protective Power of Meaning - Part 1

One of the most important lessons I have learned in that graduate school of life we call professional experience is that there is an emotional currency associated with every large gift, will or trust.  Whether a gift has meaning and purpose helps determine whether that emotional currency will be positive or negative.

How do we overcome the sterility of a legal form, or the almost myopic focus on tax savings, so that wealth transfers become purposeful gifts?  Meaning and purpose are the electroplating that can protect a gift from the potentially corrosive outcomes of sterile wealth transfers.

Recently I heard a grandfather complain about the mega-birthday parties his grandchildren were experiencing.  What is a mega-birthday party?  That is one of these 3 to 5 hour extravaganzas where 25-30 youngsters show up with presents to celebrate your child or grandchild’s birthday.  This grandfather’s question was “what can I give my grandchild which will stand out from all of those presents and won’t just end up at the bottom of the heap in the toy closest?” 

My first thought was of another grandfather I know who hand-crafted a rocking horse for each of his grandchildren.  The creativity of design and loving craftsmanship imbued this gift with that protective power of meaning.  Long after the grandchild outgrows that rocking horse it will retain its meaning and most likely will become one of those cherished heirlooms that is preserved and handed down to another generation.

Do you have a story to share with us about the importance of meaning?

Do you have an idea of how we can assist our clients put the protective power of meaning to work in their estate planning?

Unsafe at any level

When I ask wealthy grandparents what their greatest fear is I often hear an answer which translates to:  “I don’t want my granddaughter to grow up to become a Paris Hilton.”  While I have seen that wealth may accentuate the inherent difficulties of successfully launching children and grandchildren in life, I’ve also witnessed that entitlement can manifest itself at levels of wealth that most in the United States would consider mainstream middle class.  This has led me to conclude that wealth transfers can be “unsafe at any level.”

You may recall Ralph Nader’s best-selling expose of the automobile industry entitled Unsafe at Any Speed.  What Nader had discovered was an industry which was sacrificing safety in favor of the style, comfort and speed that consumers were demanding.  Nader focused on one particular car, the Corvair, which he alleged was unsafe at any speed because of inherent design and safety defects.

I would suggest that conventional wealth transfer processes and techniques are unsafe at any level.  Please don’t misunderstand my point.  I’m not alleging, as Nader did, that the industry itself is consciously choosing to produce unsafe vehicles.  Estate planning attorneys and financial planners aren’t intentionally seeking to create obstacles to the successful launching of children and grandchildren in life.  In fact, as I talk to planners all over the country I am convinced that their intentions are to assist their clients and their client’s families.   They are anxious to discover ways to improve the process and the results. 

And most clients don’t intentionally want to destroy the future happiness of their heirs.  There are a few who use estate planning as a means to punish their children or grandchildren.  But the vast majority of individuals want to enhance the lives of their children and grandchildren.  They want their heirs to have greater happiness and opportunities than they enjoyed.

Unfortunately, wealth transfer is a process very similar to the metamorphosis of the cocoon.  It doesn’t happen  overnight.   Even when the wealth is transferred suddenly, we don’t see its effect within 24 or 48 hours.  Often the unintended consequences of wealth transfers only become evident over the life cycle of a generation.  By the time they become apparent the transferor may have passed away or otherwise lost his or her capacity to positively influence the recipients of that wealth.