Classic Issues in Family Succession Planning

"[The perfect inheritance is] enough money so that they would feel they could do anything, but not so much that they could do nothing."
-- Warren Buffet

Classic Issues in Family Succession Planning: In this era of tax avoidance it often seems that the guiding goal of estate planning has become to pass as much wealth to the next generation as tax-free as possible. But clients are increasingly concerned that the passage of their wealth may do more harm than good to their family. These two articles from the American Bar Association capture in very un-lawyerlike fashion, the critical issues estate planners and their high net worth clients should consider when passing on family wealth.

* Protecting and Preserving the Family—The True Goal: Focusing exclusively on taxes subtly suggests that protecting the family assets is the primary goal of an estate plan. Clients and planners have begun to recognize that this is a misplaced emphasis that focuses attention on assets rather than family, on structure rather than perspective, on tax savings over family need.

* Classic Issues in Family Succession Planning: This article will examine some of these great human issues as they have been portrayed over the centuries between parents and their children and considers how estate planners could have helped resolve the conflicts they reflect.

The Kindness of Strangers

The Kindness of Strangers: Two studies were recently that focused on the relative generosity of various cities. The first, by the Chronicle of Philanthropy, found that residents of Detroit give more of their discretionary income to charity than do residents of the nation's other 49 biggest cities. Here's the top five:

Detroit (12.1%)
New York (10.9%)
Fort-Worth (10.9%)
Denver (10.1%)
Wichita (9.8%)

While Detroit topped the list of cities, the Salt Lake City-Ogden region ranked No. 1 when The Chronicle analyzed giving in the 50 largest metropolitan areas.

Utah County (23.6%)
Bronx Xounty, NY (23.0%)
Davis County, UT (20.0%)
Kings County, NY (19.6%)
Price Georges County, MD (16.7%)

The likelihood of finding a helpful stranger depends strongly on where you are. This extensive study of 58 cities around the world found that people in some countries (and cultures) are indeed more helpful than others. In general, those living in richer countries appear to treat one another less kindly than their counterparts in poorer nations.

So if you were blind and needed assistance, or your leg was hurt, where would people be most helpful? According to Dr. Robert V. Levine, and his students Rio de Janiero ranks first, with Kuala Lampur last. However, the author cautions, a lot gets lost in the translation. It's fascinating to read the cultural differences of the societies where these tests were conducted, and how these influenced local residents' reactions.

7% of Web Users Donate to Charity

7% of Web Users Donate to Charity:Everday more than 109 million Americans go online. The Pew Internet and American Life Project summarized its findings of what they actually spend their time doing online. Not surprisingly, email tops the list (93%). While "make a donation to charity" was done only 7% of the time (equal to taking a class online for college credit, but less than "making a phone call over the Internet" and "Buying groceries online" -- both at 8%), it was surpirisingly close to those who "buy or sell stocks, bonds ot mutual funds" (12%). In fact, if you view the other activities that people do online, the Internet is the place where people "use a search engine to find information" (85%), "look for a hobby or interest" (77%), "look for health/medical information" (66%) and "look for religious/spiritual information" (28%) -- activities that can be part of the philanthropic and voluntary engagement. The other silver lining in all this is that it topped "gambling" which was at the bottom (5%).

Irvine Gives Ex-CEO a Gold Mine: The talk of California's nonprofit sector is the compensation package the Irvine Foundation's board of trustees gave to its Dennis Collins retiring CEO. The compensation package reached $717,000 one year to lavish retirement fetes, a trip around the world for he and his wife and other gifts. This came all in the midst of the foundation losing a quarter of its $1.6 billion in assets, laying off 20 percent of its staff, and cutting its grants by $20 million. We all like to think that charitable organizations and the foundations that fund them are immune from irrational exuberance and greed that afflicted so many enterprises during the dot com boom. Unfortunately, our sector has its own conflicts of interests and Mr. Collins may well become philanthropy's version of former GE CEO Jack Welch. The real question is whether this will have the staying power of William Aramony and United Way? My opinion is that the impact will be far less severe, but could result in increased scrutiny from Washington, DC, and Sacramento.

According to several legal experts, Collins' compensation warrants an audit by the Internal Revenue Service and an investigation by the state attorney general. Unfortunately, both institutions are severely understaffed and lack the financial resources to prove a charge of excessive compensation.

Email your thoughts and opinions pro and con -- I will post the most interesting comments.

Ever hear of the Generosity Index? Compiled every year by the Catalogue for Philanthropy, the index ranks charitable giving, state by state, by U.S. citizens and companies. The index accounts for the amount of wealth that citizens and corporations in all 50 states can give, and how much they actually do give, to charities on an annual basis. The good news is that, overall, the Catalogue for Philanthropy reports that charitable giving held up fairly well during the economic woes of 2002, especially among individual charitable givers. The bad news is that affluent states like Massachusetts (44), New Jersey (48) and Virginia (37) rank at the bottom of the index, outpaced by less well-off states like Mississippi, Arkansas and South Dakota, which top the index. See where your state ranks.