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  • April 1, 2012

Wealth planning often brings forth complex questions regarding our personal aspirations and hopes for our family. The answers impact not only the lives of  family members, but our friends, organizations we care about, and even the success of our business.

Last month, First Western’s Director of Wealth Planning, Melissa Montgomery-Fitzsimmons, presented the webinar: Your Toughest Financial Questions Answered. The toughest financial questions vary from family to family. The key is keeping your family’s shared and core values  in mind to guide you during the wealth planning process.

Finding the right balance

Finding an appropriate balance between enjoying your wealth now, preserving and investing it for future security, leaving adequate funds to family members, and using your wealth to make a long-term difference requires thoughtful consideration.

Anxiety related to retiring comfortably, protecting assets, and outliving assets may cause elevated stress. Understanding your family’s core values regarding wealth will assist in answering these questions and alleviating concerns. Consider the following in determining the highest and best use of your wealth. Is it:

  • To spend it?
  • To provide a higher standard of living for family members?
  • To enable family members to choose careers based on non-economic factors?
  • To fund new family businesses?
  • To provide a comfortable retirement?
  • To provide for family emergencies?
  • To provide resources for philanthropy?
  • A combination of the above?

Most commonly, it is a combination of all of the above. There are sophisticated modeling tools to help families answer the questions and decide on the right combination. Based on your personal preferences and financial situation, these tools chart when to spend qualified assets, taxable assets, tax-deferred assets and tax-free assets to achieve successful wealth preservation. According to James E. Hughes, author of Family Wealth: Keeping it in the Family, you should take the following four types of capital into consideration when creating your family’s legacy:

Human Capital: Who the individual family members are and what they are called to do; their knowledge, talents, spirituality, values, passions, dreams and aspirations.

Intellectual Capital: How individuals learn over a lifetime and how families communicate, resolve conflict, make joint decisions, mentor one another, and how they govern themselves.

Social Capital: Individuals’ connections within the community, networks, and norms that enable people to act together more effectively to pursue shared objectives.

Financial Capital: The property of the family, its financial assets, trusts, and partnerships, and other investment and estate planning vehicles.

Recognizing each of these components and applying them to your family members will allow you to preserve, protect, and grow your wealth to enable a strong, successful family legacy.

If you would like to learn more about wealth planning or have a tough financial question you’d like to explore, please contact a member of our Wealth Planning Team.