Purposeful Trust: Put the Heart in your Family Trust

Ilze

What will your decision be about creating a trust for your family if you knew beforehand that 80% of beneficiaries of trusts perceive the trust not a blessing but a burden? Will you still create the trust for your family? James Hughes, author of “Family Trusts” says he observes an important demographic trend however – the use of trusts continues to increase, not just for transfer tax planning, but also for asset protection, reasons of probate and above all, for control. Among professionals it is a well-known fact that by the third generation of a family, around 90% of its financial wealth will likely be held in trust. Since 80% of beneficiaries declare trusts to be a burden and 90% of a dynastic family’s financial wealth is in or will be in trust by the third generation, it underscores the importance of ensuring the family flourishes and not disappear into entropy by making the trusts a blessing.

I wish to expose you the reader to the mindset and potential to hold a vision for your family for seven generations, if you wish to. Why seven generations you most likely will ask. If you hold a vision for your family and you wish to transform the proverb “shirtsleeve to shirtsleeve” or “rice paddy to rice paddy” * for your family for seven generations, it means you are holding the vision for your family to transform the proverb for two times three generations and by the seventh generation the family culture and mindset have been embedded in holding a long-term vision of being a family where every family member has the right and privilege to live lives of fulfillment, meaning, purpose and inspiration, all made possible by the financial wellbeing of the family as a whole.

I want to introduce you to a new way of looking at your family trust(s) – how about creating your trust with a heartfelt purpose and create or transform it to a purposeful trust with the right legal aspects as well as with putting your heart into it. Is your trust not in fact an “act of love for your family”? Creating a trust for your family with the vision to carefully consider the consequences of present-day actions on your people who will live seven generations later. These families grow and preserve their seven qualitative capitals – spiritual, intellectual, vocational, financial, family, social and physical empowerment capital – it’s an equal focus on the mindset and human behavior skills to have a family standing equally on two pillars: investing in the long-term growth and empowerment of the human capital and the financial capital of the family.

The key for a highly effective and functioning trust for more than one generation, but rather for multiple generations is founded in the following: The trust has a deeply developed distributive function, grounded in aiding the beneficiary’s individuation, resilience and adaptability to meet life’s ups and downs and the capacity to bring his or her dreams to life. This is truly the antidote against the culture of dependence, entitlement, cynicism and addiction, addiction to alcohol and drugs, as well as addiction to trust distribution. Begin with the following mindset: Begin with the recipient and work back through the system towards developing a highly functioning distributive methodology. From this starting point, you can work back to the quality of the trust creator’s gift of love, seeking to enhance the life of the beneficiaries and thereby inspiring that function. In doing so, you greatly enhance the likelihood of the beneficiaries declaring the trust a blessing. In turn the beneficiaries who perceive his or her trust as a blessing will most likely want to assure that all family members with trusts are in similar positive positions now and for future generations.

For the purpose of the trust creator to transform his or her trust into a purposeful trust, the following are the crucial heartfelt reasons and questions to ask:

1.     Am I intending to make a gift of love and a gift that will enhance the beneficiaries lives?

2.     Am I seeking to make a transfer that solves my tax concerns that keeps the beneficiaries creditors from getting my money?

3.     Am I creating a memorial to my dreams, embodied in an enterprise that I consider my true child and over which I seek through this trust to perpetuate my control?

A good way to diagnose whether a trust was growing a positive and dynamic culture or is caught in the negative entropy of a static, suffocating structure, is to ask the following question: “Is the trust (guided by the trustee) making dynamic distributions that promote the beneficiary’s growth and individuation or is it making sterile, annuity-type payments that breed beneficiary dependence?” Will the trust enhance the lives of the beneficiaries and encourage meaningful, purposeful, fulfilled and inspired lives or will the trust do harm?

In seeking the mindset of a purposeful trust, one has to start with a beginner’s mind and ask different questions and adopt a different approach, maybe an approach never even considered.  Maybe the most important question to ask is the following: “How can we (the trust creators) help our children to flourish rather than create “trust fund babies?” The answer seems to be in adapting the mindset and approach of a purposeful trust.

 To read more about this, I highly recommend the latest publication of my friend and colleague, James Hughes with Hartley Goldstone and Keith Whitaker, namely “Family Trusts”.

To explore the mindset, you are welcome to book a 30-minute exploration conversation with the author of this article, Ilze Alberts, Wealth Psychologist, Mentor and Author. info@ilzealberts.com

 What does the proverb mean?

The proverb means:  The first generation has the big void, and is driven to create wealth, put their energy, their focus, their time and their inspiration on growing wealth for the family, and often create a family business as a consequence.

The second generation takes over the wealth, they inherit the wealth, they don’t really know anything about the wealth creation process, and they just focus on maintaining the wealth.

By the third generation it is all spend because the third generation is used to an affluent life style but not used to being productive to have an affluent life style.

In multi-generational family wealth this is often repeated, you see this over and over again.  A wealth void drives the first generation to dedicate them to build wealth.  They have the desire to give the best to their family and sometimes they confuse giving them everything with equipping them. The first generation can actually disable the second generation and make them dependent instead of productive and inspired.

 

What happens next is the following generation is created, where the family members are enabled and they don’t have a desire to grow or create wealth for the family and down goes the wealth. It’s not uncommon. This is important feedback to the family, because nature has a way of creating that, if a person doesn’t understand the principles of wealth building and sustain the meaning behind wealth building and the purpose of it, wealth will disappear.