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. 

 

 

 

 

Important Information

LEGAL ENTITY, BRAND & REGULATORY INFORMATION

In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. JPMCB and JPMS are affiliated companies under the common control of JPM. Products not available in all states.

References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan representative. 

© 2019 JPMorgan Chase & Co. All rights reserved.


Check the background of Our Firm and Investment Professionals on FINRA's BrokerCheck

 

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
Equal Housing Opportunity logo

J.P. Morgan Chase Bank N.A., Member FDIC Not a commitment to lend. All extensions of credit are subject to credit approval 

“J.P. Morgan Securities” is a brand name for a wealth management business conducted by JPMorgan Chase & Co. (“JPMC”) and its subsidiaries worldwide. JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.