In some recent entries, we explored the various types of capital that redefine narrow ideas of wealth. These broader definitions help support frameworks for sustaining the productive use of wealth over generations. We noted that families that tend to keep their wealth over time tend to define their family’s net worth not just in financial terms but also in terms of human, social, and historic capital. We said that when financial resources are invested in maintaining these types of capital, the family is more likely to have successful and happy individual members and be much better off financially in the long run. We noted that traditional estate plans that focus exclusively on estate taxes and reducing the costs of wealth transfer oftentimes do more harm than good. As one colleague of mine is fond of saying “great tax plans are not necessarily great plans for adult development.” In seems that we are entering an age of transition planning back will focus on ways to enhance the human, social, and structural capital of the family, as well as preserve financial capital.
In coming entries, we will explore some specific ways in which transition planning can accomplish these lofty goals. We will mention some specific techniques that may be used. More importantly, we will focus on the principles that these techniques should embody. When it comes to transition planning, each family’s needs are unique, and the solutions in each family will differ. One of the great joys of transition planning is that we can flexibly respond to a family’s ideas about what they would like to provide for their individual estate plan. That said, we have found that the structures we put in place for families that are interested in dynamic transition planning typically map to some specific underlying values that I refer to as “components”.
Questions
- What components do you think are important in healthy transition plans?
- What techniques have you seen used by families to create healthy transition plans?