How To Preserve Family Wealth By Planning For Succession
In the UK alone, an estimated £5.5 trillion is due to be passed between generations over the next 30 years – according to Kings Court Trust – yet according to the Attitudes Survey 2019, only half of Ultra High Net Worth Individuals have a robust succession plan in place.
Most inheritance handovers will be seamless. However, lack of a succession plan is a concern because it takes time to devise a holistic strategy to transfer decision-making responsibilities to the next generation. Not surprisingly, there are numerous barriers to the process: timing, lack of clear objectives and in some cases the decision maker or head of the family might not be ready to hand over authority.
Alongside all this, changing family structures and a wide span of generations present challenges of their own. For example, children in different branches of the family might be treated differently, as might stepchildren and grandchildren, particularly concerning property or fine art.
Passing on wealth is a major concern for wealthy families and while there is no way of rubber stamping the transfer process, there are three approaches that one can take to prepare for successful transition.
Promoting a vision
Apart from wanting to provide a comfortable level of wealth to future generations, it is important to start by identifying clear objectives: defining how future generations should benefit from an inheritance; identifying what that might mean, to whom and in what proportions.
Some families want to maintain consistency in their philanthropic ventures, while others are more focused on creating a lasting legacy. Is there a philanthropic purpose for your wealth and if so, does it align with your family’s values? For instance, there are hundreds of foundations dedicated to different causes; from well-known ones such as the Wellcome Trust to the smaller such as the Peter Harrison Foundation. Each one has its own mission.
Sometimes the interests and focus of the head of the family do not align with the children or grandchildren. For example, baby boomers might be comfortable investing in manufacturing, but Gen X and Gen Y might prefer an emphasis on sustainable investing or in technology venture capital. There will even be wide disparities in risk tolerance amongst the beneficiaries. And then there are myriad human factors; everyone will have different personal views, experiences and needs.
Preparing the legacy
At the same time, it is important to create the right governance structures and identify the corporate trustees and lawyers that will assist you in achieving the smooth transition of assets.
Taking an integrated approach with this is one of the keys to successful transfer and management of wealth. For example, what type of structures should be established; trusts, private trust companies, foundations or even groups of companies? Co-ordinating with the relevant experts depending on the assets held and structures required is essential too.
Clients with family located internationally will need to understand the implications to the wealth transfer of offshore and regional tax regimes, for example. Even US and UK FATCA and the automatic exchange of information need to be taken into account.
It’s all about the people
Wealth transfer is of course about preservation of assets, but it is also about people. The succession structure needs to fit the individuals within the family. Some members of a family might have little understanding about finance so it might be necessary to educate them or even negotiate with them for the transition ahead. More competent individuals might want a more flexible structure in order to apply their knowledge.
It is therefore vital that the succession planning process, which can take up to a decade, includes open dialogue with key beneficiaries right from the start. A survey conducted by Moore Stephens found that nearly a quarter of respondents highlighted the difficulties when trying to reach agreements in the decision-making process.
It is quite common for people to avoid discussions about money and lack of communication can seriously hinder the process; beneficiaries need to know more than just the names of trustees or advisers.
At JAR Capital, I advise clients to include their beneficiaries gradually. To begin with it might just be an exercise in sharing information, but over time the next generation becomes more interested and seeks to take on more responsibility. This could include taking an active role in investments and governance or spearheading the family foundation.
There is no doubt that issue of intergenerational wealth transfer is a thorny one. Nevertheless, we believe that those families that take action in advance to preserve their wealth for future generations will ensure an orderly and harmonious succession of assets.
This article originally appeared on ValueWalk. Follow ValueWalk on Twitter, Instagram and Facebook.
How I run a $300M+ business from the beach…(and how you can TOO!)
Yes, you read that right.
If there’s anything the pandemic taught us, it’s that the paradigm of “office” and “workspace” has been shaken to its CORE.
Universities are teaching via Zoom, court dates are done virtually, FULLY REMOTE businesses are valued at $1B+, and legitimate Inc. 5000 startups are run from…wherever. 📲
This is my office for the day…
I am actually running our business from the beach, typing this from here.
It’s 4:28 pm CET, which means it’s 10:28 am EST and I am CRUSHING my to-do list.
(And the team will continue to crush it while I’m asleep. That’s the 🗝)
So how did we get here?
We launched NYCE and our mission to create 100,000 millionaires in March, 2020…just as the global COVID-19 lockdown happened. 😳
As a result, we shut down our main office and set EVERYTHING up to run remotely…
SMOOTHLY! And a system that allows us to outperform competition by 200%. (You can build this system, too. More on this in a second.)
Here’s what we were able to do since then:
- Gained 6M+ followers across all platforms 📈
- Add 1500+ new apartments to the portfolio 🤑
- Grow to $300M in real estate 🚀
- 105% investor returns 🎉
- 700K+ community members 🤝
And here’s the best part…
Having team members in all the main time zones gives us a 24-hour work cycle vs. 9-5/eight-hour on-the-clock performance.
This means we get 3x the productivity of a similar company. 🔥
Let me repeat that…3x PRODUCTIVITY vs. our competitors.
Meanwhile our project management software grants us 24-hour TEAM-WIDE connectivity that tracks all tasks and lets us know if productivity dips even a little bit.
There is ALWAYS someone senior awake. It could be Martin in Barcelona…Nat in New York…Vineet & Arif in New Delhi.
All the while giving YOU GUYS wealth hacks and daily content. 🔥
OK, so how can you do it?!
Well, the first step is to have an actual side hustle you’re launching. Not just an idea, a validated business.
MAJOR KEY: Do NOT spend money until you’ve made your FIRST DOLLAR! 🗝🗝🗝🗝
(You can catch a replay Business Launch masterclass here and see TRIBE member Nessa launched her business on the spot and got her first $45K client shortly after.)
One of the easiest ways to start is with Airbnb—you can start that in 10 minutes. Literally. (Here’s a guide if you need it.)
Once you have your business, you build a virtual infrastructure (you really just need two softwares, which are FREE), manage the team accordingly and run the business from there.
I’m gonna put together a step-by-step video breakdown this weekend inside the new TRIBE U on the FIVE key things you need to do this for YOURSELF. 💵 💎
From what software to use, how to build a team, how to keep.
In the meantime, drop a comment if you’re ready to build some wealth and any questions if you want more…
Let’s get to work. 🙌
PS: If you can’t be bothered with video and just wanna get to work, we’re hosting a TRIBE U workshop that will help you get this process started on the spot. It’s $479 $49. 🔥
Wealth-Building Conference Headed to Philly This Summer
Senator Sharif Street and Temple University are bringing community wealth-building to North Philadelphia with a big conference.
Co-hosted by fintech NYCE, the Senator’s office announced its inaugural WealthCon event July 23, 2022, at Temple University’s main campus.
Closing the racial wealth gap is a major challenge we face in creating a fair and inclusive society,” said Street, who represents the Third Senatorial District of Philadelphia, one of the poorest communities in America, “Investing in people is how we elevate communities with a history of divestment and educating folks on financial literacy is a critical step toward that goal.”
WealthCon is a community-first experience dedicated to providing direct access to wealth-building programs across Pennsylvania.“
We’re a big advocate of NYCE’s mission of wealth equality and are excited to help address some of the grave issues that have impacted the communities for decades,” Street said.
More than 1000 Pennsylvanians, including officials from state, local, and federal governments, will attend WealthCon, including leaders in housing, lending, education, and community development.
The conference will offer panels and keynote conversations, covering the latest opportunities in real estate investing, financial literacy (including stocks, NFTs, cryptocurrency), retirement planning, public safety, entrepreneurship, and more.
“Financial literacy is critical to long-term community building,” NYCE CEO Philip Michael said. “We’re excited to make that available to everyone.”
The evening will conclude with cocktails and networking at the invite-only VIP dinner honoring WealthCon’s Innovators of 2022.
Innovators are recognized for their commitment to closing the wealth gap in America, both within their communities and beyond. (To submit your candidate for this year’s Innovators Award, please email firstname.lastname@example.org.)
Tickets are free for members of the community. All ages are welcome.
Net Operating Income (NOI), Explained
Goes without saying, if you’re a new landlord, there are some metrics you just have to know. And if this is the most important metric to master, this one may be the most important, period…
(Pause for dramatic effect…)
Whether it’s vetting, buying or managing real estate, NOI—short for Net Operating Income—is arguably the most crucial metric for real estate investors.
NOI is simply your net profits from rental income, after your expenses are paid. Here’s why it matters and why it’s more important than you think.
Your bottom line
When you have a rental property, your end game is to make a profit. You get your rental income. Deduct your operating expenses like maintenance, repairs and so on. Now you have your net operating income, which is your bottom line.
The Net Operating Formula
Net operating income is real estate’s equivalent to corporate finance’s EBIT. Here’s how it looks:
NOI = all revenue from the property – all operating expenses
It’s a simple enough formula, but there are ways you can manage it.
In business, there are two ways to increase profits. 1) Increase revenue. 2) Decrease expenses.
Simple enough, right? With rental income, there’s only so much you can do to increase revenue. So managing your OPEX is a basic but extremely important metric to monitor — and very often the hack for value-add investors to unlock crazy profits.
Here’s the real beauty of NOI. Unlike single-family properties, the value of income-producing real estate (using the cap rate formula) is derived directly from the net income you can squeeze from it. Not supply and demand. Not the market. Not the S&P. Not bubbles. None of that.
“Net Worth Hacking”
In addition to your real estate investing hacks, if you manage your NOI, you can literally enhance your asset’s value. This is at the core of the value-add strategy. This New Jersey group bought a building for $57 million, hacked the NOI through upgrades and management, and BOOM! Sold it three years later for $101 M’s.
To know more about real estate hack, money tips, and building generational wealth, subscribe to wealth lab and learn how to bust through the barriers preventing you from becoming a millionaire.
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How Big Real Estate Moguls Avoid Taxes (And How You Can, Too) 👀
How I run a $300M+ business from the beach…(and how you can TOO!)
How To Launch Your Business In 30 Days Or Less
EXCLUSIVE: This Entrepreneur Built A $7B Business Without Outside Funding. Here’s How He Did It
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