“A crisis is a terrible thing to waste.” ~ Paul Romer, Economist
Well before working from home became the status quo, Pitcairn’s relationship management team came together each week to discuss important issues and share insights with one another. We are now gathering remotely, but our discussions are still lively, relevant and centered on you. At our last meeting, we asked about the key topics rising to top of the most current family agendas. The responses were unanimous – Wealth Planning.
With all that is happening in the world, it’s no surprise so many of us are talking about financial planning opportunities and concerns, particularly those related to investments, estate, and tax matters. Yet wealth planning serves as a fluid and evolving underpinning that also involves family matters, such as values, education, and wealth transfer goals. These conversations sit at the center of our Wealth Momentum® model, ensuring that both the financial and family dynamics are attuned to the evolving realities facing families across generations.
At Pitcairn, it is our nature to share ideas and learn from one another. We believe families of wealth can also learn from one another and we know from our regular conversations that many of you are eager to hear what’s top of mind for families like yours. During this period of social distancing, we have put together a sampling of the wealth planning conversations we have been having with you and your peers.
Make Time to Reflect
With so much distracting us these days, it would be easy to put off thinking about your wealth plan. But for many reasons, now is exactly the right time to reflect on what’s working and what you might want to change. It’s also an advantageous time to explore both short-term and long-term opportunities.
Start by asking yourself some key questions:
- What was the original intent of my planning strategy? Are those still my goals?
- What has changed since I last updated my plan?
- Have there been any life events, such as additions to the family, changes in business or employment, new goals, etc.?
- Are there new planning opportunities I should consider?
- What newly available vehicles or innovative strategies might suit my needs?
Stress Test Your Plans
Whenever there is an impending snowstorm or threat of a hurricane, people rush to prepare by stocking up on food, water, and batteries. Being financially prepared is just as vital. A crisis like we are now experiencing reminds us how important it is to make sure estate planning and other financial documents are in place long before you need them.
- Review and update documents (wills, trusts, and powers of appointment) to be sure they match your current wishes
- Ensure powers of attorney are in place in case of incapacity
- Review and update health care directives
Focus on Opportunities
The current global market decline has caused upheaval, but it has also spurred opportunity. It’s a chance to revisit and prioritize areas of importance related to your financial goals. Depressed asset values and low interest rates provide favorable conditions for wealth transfer planning, so now may be a good time to consider the following:
- Grantor Retained Annuity Trusts (GRATs)
- Charitable Lead Annuity Trusts (CLATs)
- Qualified Personal Residence Trusts (QPRTs)
- Additional charitable contributions
- Use of increased federal gift and estate exemption amount
- IRA Conversions
- Discounted transfers of closely-held assets
- Valuation of interests in family-controlled investment and business entities
- Revisiting terms of partnership arrangements
- Low-interest family loans
- Refinancing of existing promissory notes with lower interest rates
Collect, Organize, Catalog
Does your family know that you hid Aunt Sally’s silverware under the living room couch? Do they have the combination to the safe in your office? Now that we are spending so much time at home, make a point to collect and catalog your personal information, including accounts, safe deposit boxes, documents and records, as well as where to find things and who to ask for information. When it comes to tracking passwords, we recommend using a secure password manager app like LastPass.
Build Family Connections through Conversations and Storytelling
Imagine a time when families were stuck at home, as many of us are today, without Netflix, Xbox, or maybe even TV. Being homebound meant storytelling time. Family members recounted anecdotes and events that brought meaning and humor to their lives. Telling children your family’s story, including heritage, history, and accomplishments, such as how the family attained its wealth, can provide crucial context as children grow up and take more active roles in the family. It’s also a powerful way to reinforce values and behaviors you hope to pass from generation to generation.
A storytelling project can bring the whole family together. Encourage everyone to come up with questions and ask younger generations to interview their elders. Tap into their tech savvy and skill with the latest video apps to bring your family’s story to life. With everyone’s contribution, you can knit together a montage of stories that will last for generations.
There’s no question that current conditions are difficult, both from social and financial perspectives. Many things are beyond our control, but as you can see from the ideas we have summarized here, there are also many ways to take command so that we are prepared for challenges and well-positioned for brighter times ahead.