An old Kansas farmer, let’s call him Joe Riley, scratched out a living for his wife and six kids. Like many old farmers he was land rich, but cash poor. He made things work by trading with the neighbors. He would help fix a fence in exchange for tractor parts. It was a way of life. Old Joe didn’t trust his wife with money. So he set up a trust that paid income to her for her life. After her death, the land was to be divided among their six children.
Family Office Blueprint
After you are gone, who will lead your family? Who will manage your businesses and investments? Who will keep your family office doors open? Your Family Council will. Think of it as the lynchpin of your family office. Hopefully, you have begun organizing your Family Council… and had your first meeting. If not, organize it now. The success of your family office depends on your Family Council. Get this right… and the rest will follow. Get it wrong and you’re in trouble. In this chapter, I will give you the nuts & bolts of how to set up a Family Council, how it controls family money, and how to keep it out of trouble.
Last month, I told you how to set up your family “holding company”: a family limited partnership or a limited liability company. Now it is time to set up the cornerstone of your family office: your dynasty trust. Your dynasty trust will grow your family legacy through three key benefits: It can greatly reduce your tax bill. It allows you to implement the Bonner & Partners Family Office Endowment Model. It will also help you maintain your long-term investment horizon.
What if I told you there was a way to pass money on to your kids without your estate paying any taxes? And what if I told you that this was a technique used by one of America’s wealthiest and most successful families – the creators of the Wal-Mart empire, the Waltons? You’d be pretty interested, right? Well, that’s exactly what I am going to show you how to do in this Family Office Blueprint chapter.
Estate planning is all about making a plan to take care of the people you care about. This chapter of the Family Office Blueprint covers the basic hard structures. Not “basic” as in “simple,” but as in “foundational.” They are what the rest of the hard structures are built upon. I’m talking about your will, advanced directives and revocable trusts.
Most people don’t know about the Endowment Model, one of the core recommendations of Bonner & Partners Family Office. They view their parent’s money as their own. Like Stanley, they feel entitled to an inheritance. Unless your children are committed to the Endowment Model, your trustees could be pitted against determined foes. Your family office will quickly run aground on rocky shoals.