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Legacy Matters
BlogsPublications | January 14, 2019
5 minute read
Legacy Matters

Finally, New Year’s Resolutions Your Ultra High Net Worth Family Can Keep!

The start of a new year inspires many of us to create a few resolutions we intend to carry out over the next 12 months. Unfortunately, many behavior-based resolutions fall by the wayside before January is even half over.

So, if you have already given up on your resolution to lose a few pounds or run 5 miles a day, I have some other ideas for possible 2019 resolutions—my “Top 7 List” of to-dos:

  1. Start (or finally finish) your succession planning for your business and family office.
    According to findings by the Family Office Exchange (FOX), two-thirds of businesses currently lack a written succession plan, and only 31% of businesses provide education to prepare family members for a transition to leadership.
    FOX also noted that 30% of private business owners are over 67 years old, and are still actively running the business, which means that many families with businesses will be experiencing a transition in the next few years. Whether this transition will be due to a planned retirement or an unexpected event, it is clear that many families are unprepared.
    This could be because the matriarch or patriarch has not established a clear succession plan, or because the family has not discussed whether the business will be sold or run by an agreed-upon family member after the owner’s death or incapacity, or because no one has been trained or prepared to take over the business.
    This lack of preparation sets up the business for a transition period of chaos. Even assuming the family immediately agrees on the successor (which is not always the case), the ramp-up period for the new manager of the business will be substantial, and this unstructured period could deeply impact the business. Do your family a favor this year and start (and/or finish) your succession plan.
  2. Assess the liquidity needs of your succession or estate plan.
    In 2018 the markets had a tough year. But this followed several years of impressive double-digit growth, and many estates have increased significantly over the past decade. You should evaluate the liquidity needs you will have upon your death to pay taxes or honor current buy and sell agreements, and take steps to add more liquidity if necessary. You don’t want taxes or other obligations to stress the business or, worse yet, force the family to sell the business when they don’t want to.
  3. Take advantage of GRATs and sales to defective trusts while interest rates are still low.
    Some planning techniques work best when interest rates are low, such as GRATs and sales to grantor trusts. GRATs work best if they are created when interest rates are low, which allows for growth at rates that exceed the low IRS-mandated interest rate underlying the typical GRAT, thereby allowing all appreciation above the hurdle rate to pass to the beneficiaries free of transfer taxes.
  4. Use the increased exemption level.
    At the start of 2018, Congress gave us increased estate, gift and generation-skipping transfer tax exemptions. Unfortunately, these are a limited time offer. Like Cinderella’s carriage that reverted to a pumpkin at midnight, the exemption amounts will revert to their former lower level upon the earlier of January 1, 2026 (a mere seven years from now), or when a future Congress changes the rules. 
    Now is a great time for ultra high net worth individuals and families to make large gifts that use up the increased exemption amounts. Even better, now is a great time to make “seed gifts” to grantor trusts that can then purchase assets of the grantor trust and thereby leverage the exemption available to the family.
  5. Have a family meeting this year.
    If it has been a while since your family has had a meeting, it is probably time to get together, at least to discuss changes to your planning, the environment affecting your businesses, the administration of trusts, and investment opportunities available to the family. And since you are getting everyone together, you can add in a couple of sessions to reinforce shared family values or prepare the next generation to be effective stewards of the family’s wealth, and you can incorporate a family bonding event that will have everyone looking forward to the opportunity to be together.
    If your family has never had a family meeting, there is no time like the present to get them started on the path to cohesion and harmony.
  6. Create a family constitution.
    If your family does not have a family constitution, resolve to create one in 2019. A family constitution provides guidelines for how they will work together, make decisions and solve conflicts. This is an especially useful resolution to make for families where the senior generation is nearing retirement or otherwise aging, and the family would benefit from an agreed upon framework that will guide the next generation’s trusts and management of the family business, family office and family assets.
  7. Revisit your philanthropy plans.
    Now is a good time to look at your charitable giving plans and determine if you have given appropriate direction to your family about the impact you want your money to have and the areas that you wish to impact. If you don’t have a charitable giving strategy on paper yet, create one this year. It will be very helpful for the next generation as they try to honor your legacy.

I hope you have found some New Year’s resolutions that you can stick to this year. If you have added one or more of the resolutions from my list to your list and need assistance in keeping these resolutions, please contact your Warner attorney, or contact me at or 616.396.3225.