One of the questions that gets asked during almost every business review in our Vistage meetings is “What Happens If You Stop The Bus”? As leaders, our job is to live in the future to prepare our organization and family. Unfortunately, we have little to no control when we will “exit stage right”.
One of our members was fifty and his kids were in college. He had a successful company with a respectable net worth that required tax planning. After our line of questioning, it became evident that he had very little planning in place. There were no wills, trusts, or discussions about what should happen. There was insurance in place for a buy/sell agreement with his partner, but very little structure.
One of the tenents of a group like Vistage is to hold each other accountable. The outcome of this business review was to have the member bring back a completed estate plan in one year. When he came back he had a funded family trust, revocable trusts, irrevocable insurance trusts, and wills. At fifty-two years old he suddenly passed away from a heart attack.
On March 11, 2012, my father passed away and I was his executor and successor trustee for multiple trusts. What I learned from these experiences is even with the best formal plans (trusts, wills, etc.), it is very helpful to share the intent and thought process regarding decisions that were incorporated into your estate documents. Shortly after my father’s passing I wrote two letters. One to my best friend who was my successor trustee and executor and the other to my business partners. The following was the outline for my family letter:
Professional Team (name, address, phone number)
- Lawyer, Accountant, Family Chief Financial Officer, Insurance Agent, Bankers
- Asset, Titling, Location, Account Number, Contact Name, Phone #, Balance, Purpose
- Our estates would receive at some point funds from our parent’s estates. Explaining any future impact or transaction will allow better planning. For planning purposes I roughly provided an idea of what funds or responsibilities might be coming our way.
Family Estate Plan
- List of every family member, SSN, DOB
- List every trust, title, tax ID #, and author
- Provide a narrative of every trust, purpose, trustees, successor trustees, beneficiaries, disposition of trust, termination
- List of corporations, type (LLC, S-Corp, etc), role, contact, % ownership, estimated value
- Insurance Coverage, insured, company name, policy date, policy number, owner, beneficiary, death benefit, cash value, annual premium, premium due date, agent name and phone number
Family Operational Plan
Since the intended audience of this letter was not a family member, I described how we lived, where the money came from, what was the cash burn rate, etc.
Directives and Background
In my case, my best friend would be my executor and successor trustee after my wife in some cases. I will explain more in a future post.
Children: I shared the strengths and challenges of my children. Suggestions on what type of mentoring they would need and general discussion of financial support. I also discussed who should and could be a guardian. I discussed several scenarios on how he could use trust and personal resources to respond to specific children challenges we anticipated.
Money: I provided a summary of the resources that would be available and our intent on how to provide for our children. Our first goal was to do no harm. We discussed the intent of allowing when and how for them to control their trusts and how we intended to protect them if they were to get divorced.
Resources: I also provided the names of my Vistage group members. These individuals know more about me, than me. They would be a good resource if he needed to bounce an idea off a knowledgeable group.
I update this letter every year and it gives my friend and I an excuse to get together and discuss life. When my wife and I are traveling the world together, it gives me peace of mind that my family will be in good hands if something should happen. It gives us the freedom to live life.