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ICRA Labelled


Web Site Story
Pick of the Week! 3/16/98


Planning for More than Three Generations:


By Myra Salzer
Award-Winning Wealth Coach and Family Legacy Guru

I am seeking compatriots in the battle to erase yet another inheritance myth, that old phrase "shirtsleeves to shirtsleeves in three generations. That's the old curse ”commonly believed in many societies worldwide” that a family's money is unlikely to survive beyond its third generation. Jay Hughes is one of my compatriots; he has what I consider a very helpful outlook on what it takes, starting with long-term thinking. Hughes cites a certain personal affections” one that transcends pure botanical allure” for the copper beech tree. As he explains, this particular tree is emblematic of a commitment to planning for more than today, more than one lifetime, and even more than 100 years:

Think of the courage it takes to plant a tree that takes 150 years to mature ... someone must invest love and patience to nurture it. Think of the hurricanes, ice and
snow, pests, and fire that may consume the tree while it is too young to withstand those hazards. It needs help to survive those threats ... As it matures, it has to
contend with humans who want to cut it down for its wood, and with governments that want to put a road or a new housing development where it stands. The issues
the growing tree faces parallel those in the unfolding life of a family.

With stock tickers that change by the minute, daily market reports, and property values fluctuating more than annually, it shouldn't be surprising that the world tends to take a very short-term view on finance. Where's the nightly news story on the progress of a hundred-year investment plan? It would be like reading second-by-second updates on the progress of a snail crossing your lawn toward your gardenias.

Revisiting for a moment the discussion on risk, there is a tendency to call certain very conservative investments, like government bonds, "zero risk." When working with inheritors who want to defy the shirtsleeves myth, I ask you to adopt a broad view of time, one that sees more than three generations into the future. That can be 100 years or more, the life of a copper beech tree and beyond. Looking that far ahead, I consider that there is no such thing as zero risk. Think about it: Governments have failed in less time, companies rarely survive a century, and even banks often vanish before your grandchildren are born (the understatement of the decade). So there's an element of the unknown you need to consider when managing your inheritance: your wealth could, and should, still be around in a time of flying cars and robot butlers.

Have you started saving for your great-grandchildren's cyborg immune system upgrade fund? Have you factored in depreciation on your family's Martian vacation home? I know all this sounds silly, but what would your great-greatgrandparents have said in 1904 about your plans to invest in a company called Google in 2004? "Can you tell me what they do again, sweetie?"

The bottom line is that this kind of long-term perspective requires more than just financial modeling and precise asset allocation. You've actually got to look at the big picture of what you're creating and which direction you hope it will go. I believe that we have a slim chance of guaranteeing a certain number of dollars or acres any time
in the future. As just two examples of financial wealth, the value of money and of land" meaning their relative importance in our lives" just changes too much from generation to generation. What doesn't change as quickly are our core values. Identify yours, then build an infrastructure to share them with future generations, and then you'll have a model for long-term wealth conservation.

There's no reason human values can't drive wealth management more than financial concerns. As markets rise and fall, people still seem to find meaning and direction in their lives. Put your money in service to your value system, and you'll find it's piggybacking on something far more predictable than the stock market.

Anticipating Change and Coping with the Unexpected

By the time you have adopted a long-term view of your finances, grasped your connection to the story of your wealth, and developed a sound investment philosophy of stewardship and conservation, you should be well prepared to handle many changes ahead. But what fun would that be? Thankfully for lovers of adventure, the world has a special way of surprising even the most doggedly prepared. The unexpected is not always a financial setback. Haphazard genetics can give a child Down Syndrome. The Grim Reaper doesn't always call ahead for an invitation. Wacky life dreams can intrude on the most sensible of lifestyles. Good, bad, and ugly turns of events can suddenly redirect your time, your visions, and your finances.

If you get in touch with your heart and gut (the organs I associate with your core values) and the substance of your soul, you're tuning into a compass that is more likely to guide you through uncertainties than an eye toward some future financial goal. An old parable from the East goes something like this:

A young man once sought out a well-known instructor
of martial arts. He said, "I would like to become the greatest
martial artist in all the land. How long must I study?"
The instructor told him, "Ten years, at least."
The young man frowned, saying, "That is a long time.
What if I studied twice as hard as the other students?
How long would that take?"
"Twenty years."
Quite frustrated now, the young man asked, "Why,
if I work harder than the other students, do you tell me
it will take twice as long?"
"It is simple," said the instructor, "with one eye fixed
upon your destination, there is only one eye left with
which to find the way."

Sort of recalls the tortoise and the hare, right? The point is that there aren't any shortcuts. You can, in fact, slow down your progress in life if you become fixated on a finish line. The alternative? Listen to your heart and your gut and let their voices weigh in on your direction and your plan.

If your heart and gut speak like mine, though, you may need some help translating. For instance, how do you follow your heart on investment decisions that never made any sense to you in the first place? How do you trust your gut when you don't even understand the terminology in the questions you're asked? That's where I counsel inheritors to employ experts who can break down the walls of jargon that surround their respective fields. When an advisor can explain a decision you're facing in simple terms" such as listing the pros and cons of your options" then you can use both head and heart/gut to make your decision.

Your core values may well be the only things you can count on down the twists and turns of life into an uncertain future. When the flying cars and robot butlers arrive, only your heart will tell you which scenic backroads to fly for the afternoon and only your gut will know which flavor-pellets to order for lunch.

Now getting in touch with the substance of your soul, your core values, the desires of your heart, and the inclinations of your gut: that's not something easily dismissed. But it's an ongoing quest you should pursue your whole life and an exploration I encourage you to undertake as soon as possible. How about just as soon as we wrap up this book?

Satiation Spending and Defining Your Nut

You've been allocated one lifetime; that's it. Regardless of the source of your wealth, regardless of whether you're planning a legacy that will survive you, you have until the day you die to achieve your dreams. True, you can create legacies that will carry your visions beyond your grave, but you've got to envision those plans and set them in motion while you're still here. So an important step in wealth planning is to assure you'll have enough to satisfy your needs and desires throughout your life expectancy. That's called securing your "nut" (finally, a financial term from the squirrels rather than a Scrabble® triple-word-score Hall of Famer).

Start by defining and articulating how you want to spend your money throughout your life: I call this "satiation spending." This will be much more than your Christmas list for Santa" a good wealth coach can guide you through the process. Together you'll take what you have and what you plan to spend, mapping that over a realistic projection of your lifespan. You'll extrapolate a return on your investment, an inflation rate, a life expectancy, and voila! That's how you'll determine if you have enough assets to meet all your needs and wants.

The nut is the amount that supports your satiation spending beyond your expected lifespan. It requires consideration of investment returns, changing personal circumstances, market fluctuations, and on and on. Like so much in this process, it's an arbitrary calculation, though not random: inherently flawed but helpful nonetheless. The flaw is that nobody can see the future. For instance, in 2004 you never saw a nut calculation that anticipated the 50 percent market slide in 2008-2009, but a good calculation will specifically address and provide reasonable flexibility to accommodate such surprises. Where nut calculations are helpful is taking your financial snapshot your sense of where you stand now" and telling you whether you're likely to have enough.

Dan Jones
Two Sheps That Pass...
401 Broadway, Suite 804
New York, NY 10013
646.613.1101 t
425.790.5717 f
dan@twoshepsthatpass.com  e
www.twoshepsthatpass.com  w
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