Building your estate isn’t just financial planning- it’s about values, principles, and defining your … [+]
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1- Only Passing On Money, Not Values
Don’t get bogged down in trying so hard to pass on tax-free money that you forget the most important thing you could ever leave for your heirs- your personal philosophies, values, and principles. Money can be spent in a day, but the values you used to build your business and grow financial success are what will keep it in tact for generations to come. Teach your heirs your philosophies, your standards, your core values.
2- Not Starting Early Enough
I feel estate tax is almost like a penalty for those who didn’t start early enough. If you plan right, you can avoid the estate tax. A common reason people make this mistake is thinking you have to be wealthy before you start your estate plan. Another reason is people think after their first draft is finalized, they are somehow done. Estate planning is dynamic just like life. While you are alive it must be updated in order to stay relevant. So, just like the dentist, before you leave the attorney’s office, set the next appointment- even if it’s a year from today. This will help you coordinate how to capture the things that help you leave your legacy.
3- Leave Behind Opportunity, Not Money
It’s not about leaving an inheritance, it’s about leaving an enhancement to education, purpose, and opportunity. If your heirs can borrow money from the trust rather than feel entitled to getting it no matter what, you can create stewardship, reward production, and abolish entitlement. You can leave behind a “family bank”, where you can earn interest on your heirs pursuits rather than paying it to the bank and they can do the same for generations to come—cutting out the middleman and keeping your wealth within the family.
4- Investing In Assets Outside Of Your Wealth
Because I believe that my family’s legacy is so important, I invest in my heirs. Rather than investing in faceless corporations through stocks, I put that money into my heirs to develop skills and to gain clarity around their purpose. I strive to be a bank and a financing institution for their ideas. This lays the foundation to insure the perpetuation of our wealth.
5- Not Having A Board Of Trustees
A Board of Trustees can look at your values, principles and insights to mentor generations to come. Pick the people who share your core characteristics and values—people who you want to influence your kids if you’re not around. Those who could advise them. Pick from a diverse range of experts; those who are amazing with business, skilled with money and some who are experts in purpose. I have five different individuals that my kids can learn from after I’m gone and support them in building our legacy and creating wealth. Once again, I’m leaving behind opportunity, not inheritance.
6- No Trust Protector
You can have an individual designated to veto any irrational actions or speculative investments. This will work to protect your heirs. If for some reason the trustees on the board begin to invest the funds in a different way than you originally intended, then your Trust Protector can stop it. This individual should preserve, protect and perpetuate the money.
7- Own Everything, Control Nothing
A Domestic Asset Protection Trust (DAPT), can allow you to control everything but own nothing. This keeps assets out of your estate for legal and tax purposes. Some people use an Irrevocable Life Insurance Trust, which means that you can put money into your insurance plan, but you can’t touch your cash values. This will protect your heirs from estate tax when done properly, but at the expense of you using the cash value while you are alive. Instead, using a DAPT you can appoint a Distribution Trustee so the money is out of your estate, therefore protecting you from tax and financial predators while still having access to the cash with permission from your distribution trustee. It remains an Irrevocable Trust, but you now can control the trustee that determines if you can get the cash or not. If you disagree, fire them and hire someone who agrees with you.
8- Not Having A Family Constitution
The legalese of a trust is an important part of your estate plan, but writing a family constitution, declaration, or creed gives a more dynamic way for the Board of Trustees and heirs to execute with your intentions and guidance. This leaves signposts of what to do rather than rigid orders that may become antiquated over time. A Family Constitution can allow you to create incentives for your heirs and have them learn from your greatest discoveries.
9- Not Investing In Tradition
All great religions and cultures have something in common; rituals, traditions and symbols. Businesses do the same with logos, meetings and processes. In your family you can create symbols as a reminder of values. Then, use rituals and traditions to create habits and keep the family together.
10- Not Thinking You Have Enough Money To Matter
This is the biggest mistake of all. You’re future posterity doesn’t have to be born into financial bondage. You can act now to begin your family legacy and estate. If you have a life you yearn to live and love along with hopes, dreams and values to pass on to your family—then you have enough wealth to matter.