Wealth Planning

The bucket list: Can you grow your assets for…ever?

You’ve got assets to last generations, but do you know the purpose of your wealth? The power of intent can help grow your assets in perpetuity.

Some of us are fortunate enough to own assets—maybe these assets are held in a business or a family office, or a pool of investments—that are meant to grow in perpetuity. The business will never be sold, the family office is set up to last as long as one can imagine, the money is not supposed to be consumed—that’s the goal.

In many ways this is a welcome position to be in, and in other ways it presents some difficult questions that need to be addressed: What is the purpose of the wealth? Who needs to be involved in nurturing and growing the capital, now and in the future? How long are the assets meant to last?

These are some of the questions that surround the last item on our “bucket list,” our approach to organizing your money with intent. In previous articles, we’ve described the first three: the liquidity (or cash) bucket, the lifestyle bucket which aims to provide for our lifetimes’ needs and wants and the preservation or division bucket which contains money meant to be used beyond one’s lifetime. The fourth—and last one—the growth bucket, holds wealth meant to grow in perpetuity. And because these assets will be nurtured for future generations, family members and financial professionals may need clarity on answers to the questions below in order to successfully grow their wealth.

Who are the stewards of this wealth?

For each bucket, we want to be intentional, explicitly identifying the primary purpose, or intent, for our money. For assets in the growth bucket, the wealth owner needs to clarify in his or her own mind what the wealth is for, and who—which heirs or beneficiaries—will own the assets beyond the wealth creator’s lifetime. She or he should clearly communicate that purpose to heirs and beneficiaries. Perhaps everyone involved agrees with the stated purpose for the wealth. But maybe they don’t, and that needs to be taken into account.

Here’s one scenario. The wealth owner declares the purpose for the wealth and creates a succession plan for the assets via a business or family office. The designated beneficiaries are the wealth creator’s children. They fully support the stated mission for the family’s wealth.

In another scenario, the children don’t buy into the stated mission, perhaps because they have other passions and purposes in life that they would like to pursue. In this case, the wealth owner does not set up a succession plan where the children are the key decision makers. Instead, he or she establishes a transition plan that aims to ensure that wealth decision making is sustainably outsourced to professionals, and that the children are involved at a level that allows them to understand what has been put in place.

In some transitions, the wealth owners agree that their beneficiaries can take the reins of the wealth they have created and redefine the mission for that wealth based on their own values or choices.

The possible scenarios are endless—which is called “N=1.” N=1 is the idea that every family’s needs are unique, and that every approach can be tailored to meet the needs of that particular family. To that end, whatever the transition approach, it helps enormously when the future stewards of the growth assets have a genuine sense of ownership regarding wealth they have not themselves created. Research suggests that people feel very differently about money they earn versus money they are given—and that same principle applies here. They may not naturally feel that deep sense of ownership. To foster it, we find from our experience working with wealthy families, collaborative processes—more on that below—work best in the long run.

In what form will the assets grow?

Growth assets can be held in various forms. They might consist of a pool of investments, perhaps containing a very concentrated private equity stake or single stock holding. The growth assets might be an operating company, or a collection of commercial and residential real estate. The possibilities and combinations vary greatly.

Regardless, family members or heirs of the wealth creator can benefit from staying engaged in the process of capital growth. Certainly in a family business, one or more family members can take some kind of leadership role, even if management of the business has been completely outsourced. Less obviously, but no less importantly, a family leader or leaders can stay engaged in the management of a pool of investments, even if that, too, has been entirely outsourced.

Ideally, that continued engagement will establish a culture and infrastructure of family unity. Family members can treat their shared wealth as a shared asset—and its nurturing a collaborative endeavor. In this context—and this is key—family members should have a collaborative view about risk taking (see box).

Graphic showing three ways to think about risk: Risk required, risk capacity, and risk tolerance.  Graphic showing three ways to think about risk: Risk required, risk capacity, and risk tolerance.

For how long will the assets grow?

When people place assets in a growth bucket and say they are meant to grow forever, do they really mean forever? Not always. They may decide that there will be distinct decision points, perhaps when the assets move from one generation to the next, which present an opportunity for a transition to another purpose for the money. Or the wealth creator and his or her beneficiaries may decide together to transition. Alternatively, they might decide to move the assets out of the growth bucket altogether, selling a business or a stock, say, and distributing the proceeds among the collective beneficiaries. Ultimately, how long the assets grow will depend on a range of factors, but the intent of the wealth creator—and his or her ability to convey that intent to heirs—will be key.

Final thoughts

We return, as we often do, to the concept of intent. Being intentional is especially important for assets in the growth bucket. Know the ultimate purpose of your wealth, and determine who needs to be involved in growing the capital, now and in the future. These assets will have such a long life, after all, with such powerful effects on generations to come. 





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