It began with an idea and a small team handling many responsibilities in support of that big idea. The firm grew exponentially, and you entered the pre-planning phase to sell your company. Now the sale is closed and you've received a significant windfall of liquid wealth. What's next?
When you worked what seemed like 25 hours a day, you prided yourself on being able to squeeze in an extra hour to be even more productive. Fast forward to now - you likely find yourself in the enviable position of having free time. A lot of it. Similar to what transpired in the pre-planning phase, it's now time to pre-plan for the next phase of your life.
You may have already addressed estate, tax, and financial planning issues; however, have you addressed legacy planning?
Ask yourself these questions:
- “What do I do with this new wealth?”
- “What core values will drive my decision making?”
- “What's my family’s capital - financial, intellectual, social, human and spiritual?”
- “How can I use our time, talents and treasure to make a positive impact?”
- “How do I prepare my family to successfully steward this wealth?”
- “What is my legacy?”
PLANNING FOR WEALTH
Research shows that only 30% of wealth is transferred beyond the second generation, and only 10% beyond the third. The major reason? Lack of legacy planning. Here are seven action steps to take to prepare yourself and your family.
1. Take a deep breath. It's common to have mixed emotions about the sale of your company and your new level of wealth. Elation, empowerment, adrenaline, freedom and a deep sense of accomplishment on the one end, with insecurity, a sense of loss, a heightened sense of responsibility, emptiness, paranoia and boredom on the other end. Rest assured, these feelings are normal.
2. Don't make any major decisions in the next three to six months that cannot be easily reversed. This time of mixed emotion is often referred to as the “Decision Free Zone”.
3. Make a list of friends and family members you trusted prior to the sale of your company. Distant family and friends tend to come out of the woodwork to congratulate you, hoping you’ll share your wealth. Newfound friends and business partners may emerge with "great opportunities". Ultimately, you may decide to share your resources, but for now, focus on maintaining a clear sense of who was an integral part of your life prior to your liquidity event.
4. Consider the trusted advisors – CPAs, attorneys, private bankers, financial advisors – that you worked with prior to the sale of your company. Objectively assess their competence and experience level to see if they are best suited for your sophisticated needs. Surround yourself with a select group who have proven experience in guiding wealth creators like you.
5. Make a list of your passions and priorities. Art, medical research, animals, spirituality, education, the environment, whatever is meaningful to you. Ask your family to do the same. This insight will help guide estate and financial planning, and more specifically, charitable giving.
6. Create a “Bucket List” – things you want to do, see or experience before you no longer can. This is a very unique time in your life with the world at your fingertips. Your financial and legacy plans should absolutely reinforce this list.
7. Remember, the thoughts and feelings you’re experiencing with sudden wealth will be very similar to the experiences your children will have should you decide to transfer significant wealth to them. Careful planning with this in mind will help benefit your entire family in the long run.
WHAT IS YOUR LEGACY?
Legacy planning should be fully integrated into your estate, tax, and financial planning. Here are four steps to help optimize your family life, happiness and wealth decisions.
1. Create a Family Values Statement incorporating wishes, concerns, values and goals.
2. Customize a legacy plan that addresses current and future family needs. Plans may include book recommendations, coaching sessions, next-gen financial education, outside experts (e.g. personal and cyber security) and multi-generational family meetings.
3. Execute the legacy plan in partnership with your family and other trusted advisors.
4. Regularly evaluate the success of the legacy plan and reassess the changing needs of your family.
Simplicity and peace of mind are commonly at the top of every CEO Founder's list. It is essential to prepare for the sale of your company and to strategically structure and manage your wealth. But after liquidity, one of the most rewarding feelings is to execute a legacy plan that personally answers the question, "What's Next?"
With over $4 billion assets under advisement², PagnatoKarp specializes in Intelligent Wealth Management™ for CEO Founders, wealth creators and ultra-high-net-worth families. Frequently ranked on top financial advisor lists by Barron’s and Forbes, and a Virginia Best Place to Work³, our goal is to simplify and elevate your life so you have more time to spend on what matters to you most.
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