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How You Can Ensure Next Gen Is Ready for Wealth Transfer

By Motley Fool Staff – Aug 21, 2020 at 11:24AM

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About 70% of all efforts to transfer wealth fail. Discover what you can do to ensure a successful transition.

In this episode of Rule Breaker Investing: Authors in August, Motley Fool co-founder David Gardner chats with Amy Castoro, co-author of Bridging Generations. Castoro is president and chief executive officer of the Williams Group, and she specializes in working with high-net-worth families to prepare the next generation for a successful transfer of family wealth and values for a sustainable legacy. Find out what usually goes wrong with wealth transitions and learn how to avoid those mistakes in preparing the next generation for its inheritance.

Also, get a sneak peak at what's coming up next week on the Rule Breaker Investing mailbag episode.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on August 18, 2020.

David Gardner: So you wrote your will. Great job. You're one of the one-third of Americans who's done so. You took the time to communicate to the people that you love a few key things: how you want to be remembered and what you want to pass on to them. And you have something to pass on. Great job. This is something The Motley Fool is trying to help you with. We're trying to make you smarter, happier and richer. We believe that anyone, no matter where your starting line was, can reach the finish line and have assets that you've saved and grown. We hope through compounding returns, over time, you have something to pass on. Great job.

But I have a stark truth to share with you. And in fact, it's going to kick off this week's podcast, as I'm joined by co-author Amy Castoro to discuss her book, Bridging Generations.

Here's the fact I want to share: 70% of all efforts to transition wealth to the next generation fail. That is to say, the wealth does not continue under the control of the beneficiaries. That might be because it disappears or because they lose control. And if they do, that's often not through their own fault. Nope -- it might be yours.

This week, we're going to provide you the greatest wisdom we can find to help you transition your wealth to your next generation. Given that we're all long-term players here and hope to have something to give, the operative question is, will you do it well? Will you be one of the 30% that succeeds? How? Find out only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing. A delight to have you joining with me and my guest this week. If you've been listening throughout the month, you know that its Authors in August once again here in 2020. And we've had two wonderful authors in conversations earlier this month. We kicked off the month with Completing Capitalism, the book by Jay Jakub and his co-author Bruno Roche. And Jay joined me, and we talked through how to do capitalism better. A lot of us are fans of conscious capitalism, something I've talked a lot about on Rule Breaker Investing over the years. Well, Jay and his book, Completing Capitalism, help us think through the other forms of capital that we often don't think as much about. A lot of us think a lot about financial capital, but maybe not as much, in our businesses, about human capital or social capital or natural capital -- how we're treating the world around us. So a wonderful conversation with Jay.

And then last week, the esteemed Dr. Jeremy Brown, his book Influenza, talking about not just the pandemic of 1918 -- but certainly that, that is the purpose of this book -- but also, of course, talking about our pandemic. And it couldn't be more relevant to have somebody who's working at the National Institutes of Health in the Office of Emergency Care Research talk not just about his book of a couple years ago but about our lives today going forward.

So I hope you'll listen to both of those if you didn't get a chance. A lot of us do take August off, so if you're just tuning in sometime in October, well, welcome. This is what we did last Summer, and I'm really delighted this week to be joined by Amy Castoro.

Now, I've often said about Rule Breaker Investing that we spend about one-third of our time on investing, one-third on business, and one-third on life. And if you just heard me summarize Authors in August, you heard about Jay Jakub, Completing Capitalism; that sounds like business. And then you heard me talk about Jeremy Brown and Influenza; that sounds like life. Well, today, we're focused mostly on investing.

As I mentioned at the top, a lot of us aspire to have something to give to those who come after us, our beloved family members and friends. Ironically and sadly, even for those who have quite a lot, very frequently, it fails. My guest this week, whom I am going to introduce very shortly, looks at the positive side of things, looks at how to do it well, how to do it properly, so that you become one of the minority of all people who have something left to leave that does it well and that does it in a sustainable way.

Amy Castoro is the president and chief executive officer of the Williams Group. For eight years, Amy has specialized in preparing high-net worth families to prepare the next generation to successfully transfer family wealth and values for a sustainable legacy. Amy brings more than two decades of experience in developing leadership competence, aligning ambition with purpose and increasing authentic communication and productivity. Her experience with Walt Disney Company, Adecco Corporation, and Grant Thornton Management and Consulting provided her with a strong foundation of leadership in organizations.

Today, and we're recording this for-the-record on August 18th of 2020, today is her 30th wedding anniversary. Amy, welcome to Rule Breaker Investing.

Amy Castoro: David, thanks so much. It's a pleasure to be here, truly.

Gardner: I am amazed that you blocked out the time. I'm sure you have something special planned for tonight, but let's try to make a special afternoon, not just for you, but for all of our listeners, the conversation that we can have together today.

Castoro: Absolutely. Thank you.

Gardner: Congratulations, though, on 30 years. Do you want to share -- I had 30 myself earlier this year, we had to, kind of, scuttle our plans and determine -- yet to be determined, actually -- what we're going to do for our 30th. Amy, what are your plans?

Castoro: Yeah, same boat. The possibilities are endless. We're still trying to figure it out, but we are having a lovely evening here. And truly, you know, this is going to sound a little bit corny, but every day is a gift with this guy, so I couldn't be happier. Really, every day is a day to celebrate. We're off to a good start.

Gardner: So well put. I know you have two wonderful kids who aren't really kids anymore; kind of like, this is the way I talk about mine, because they're in their 20s.

Castoro: Yeah. They all left, and now they're back home. So yeah, we're, sort of, doing a double take on this, but I couldn't be more happy to have them back in the nest.

Gardner: [laughs] And that describes, indeed, a part of my 2020 as well. So we're all living through a lot of shared experiences, and experiences we hadn't expected and, in many cases, hadn't had before.

Well, Amy, let me start with a confession, and that is, I always try to read in full the books of my Authors in August, and I first found the book Preparing Heirs when it was recommended to me by my good friend and coach, Heath Dieckert of the Dieckert Consulting Group in Dallas, Texas. And my friend Heath said, David, you know, you should make sure you're thinking about what's coming next and are you setting your family up for success. And he said, you should read this book Preparing Heirs. I did.

Now, I found it on Amazon, it was only in a hardback, there was no Kindle version. I did order it and read it in full, Amy. [laughs] And then I discovered that there is a second edition that you co-authored with Roy Williams, Bridging Generations. And I'm happy to say it is orderable on the Kindle, for example; I tend to read electronically more so than paper books these days. So I have to admit, I feel like I've read the book and yet I haven't read the book.

And, in fact, before we start our conversation, we're going to start with that 70% statistic, which is eye popping, but I wonder if you wanted to say something about your co-author and founder of the Williams Group, Roy Williams?

Castoro: Thanks, David. I really would love to. So Roy was a visionary. He was an athlete. He played for the NFL. He then went on to work for New York Life. And what he saw was that a lot of his peers were losing their wealth. And he knew the children of these people, and he knew that didn't make sense. And he wanted to do some homework to figure out why that was. So it is really because of Roy that we have this business today and a lot of people's awareness on preparing the family for their assets.

Gardner: Wonderful. And so, when the second edition came up, it was that time, probably, just to refresh the book; Amy, you were invited by Roy to be his co-author?

Castoro: I was. Absolutely. And took over the business three years ago, when Roy passed away.

Gardner: Wonderful. All right. Well, we've talked about it enough; let's actually understand it. [laughs] Amy, 70% of wealth transitions are unsuccessful. Could you start maybe by defining what is an unsuccessful wealth transition?

Castoro: Yeah, pretty simply, that's looking at, does the family stay in control of the assets, and does the family remain united? So for us, a successful wealth transition means the family stays intact and they maintain control of the assets.

Gardner: And then my assumption would be if somebody has taken the time to write a will, which many people don't, that clearly would be setting everybody up for success. I was assuming, before I read the book, that clearly, in my mind, the majority of the time, if somebody is taking the time to write out a will, darn it, that's probably going to work. Good job. So what are the factors -- before we get to what we should be doing and the positives, what's going wrong?

Castoro: People are tranquilized, truly, by their estate plan. They set it up in a way that it will preserve taxes, they preserve wealth, but they're really not paying attention to the impact of that estate plan on the next generation. So they think "I've checked this box. I can just relax now." But truthfully, the biggest risk to their portfolio is not the market or the business or even the competence of the people they have supporting them. It's actually the people sitting around their Thanksgiving Day table.

Gardner: And it's so, in a way, logical and so commonsensical, when you put it that way. And yet we do live in a world, and it still is mostly set up this way, of accountants and estate managers, people who are really good functionally at doing the money things that they have learned to do and do so well, and so competently, most of the time. It's not fraud that's causing us to unsuccessfully transition our wealth, but as you're pointing out, Amy, and as Roy, obviously, make clear through his life's work, it's the whole family side of the equation, it's the conversations that don't necessarily have the accountant who is trying to reduce everybody's taxes by the second or third generation. It's the conversations.

Castoro: Right. So the accountants and the legal teams, they are designed to protect the assets, and that's what their advisors are trained to do. Now we're starting to wake up and see, oh! we need to be preparing their family for the assets, and that's really where this 70% attention comes from. We know, from lots of studies, that one-third, or 30%, of businesses will transition to the next generation. That means 70% won't. And so Roy Williams wanted to do some homework on why that is. And so he went to all of the top financial people and business schools and said, what is going on? What's driving the shirtsleeves-to-shirtsleeves phenomenon that's happening?

And so, they said, well, there's this much wealth, and then there's that many family members. So over time, of course, there's just not going to be enough. Well, Roy knew the children of a lot of these very successful people. And he said, they have the same DNA, they have the same energy, they're as innovative. It doesn't make sense to him that that wealth wouldn't just continue to grow.

So then he went to talk to the psychologists. And he said, what's happening inside the families that has this not work out so well? And they said, well, families don't just inherit wealth, they inherit the same patterns. It's not safe to talk about money, and so that gets inherited as well. So what he decided to do then was really just asking the audience. And over the course of about 20 years, he interviewed over 2,500 affluent families. And he said, what's happening in the families that has wealth transition well? What are they doing that other families are not doing? Then frankly, that's what he built the company on.

Gardner: And to start to go a little bit further into the book, Bridging Generations, successful transitions most frequently included three factors. I am just going to put them out there and then just ask you to comment on them. The first one, Amy, is total family involvement.

Castoro: Yeah. So many times, the advisors and the wealth creators will think it's all of their decision, it has to come from the top down. And that is the Achilles' heel of a successful wealth transfer. Every family member I've ever interviewed or worked with has said, "I need to know how this wealth is going to impact me and my kids, and I'd like to have some say on how that happens." They don't necessarily maybe share the same values, where they want to be able to buy their kids their first home. They might want to have their kids work to buy their first home. So it's a very tricky conversation to think that it's just going to be the wealth creator that dictates the future of how the wealth impacts the lives of their children and their children's children.

Gardner: And I guess it's, in a way, further compounded by the notion that many share -- I was certainly raised this way; I'm not sure I fully agree with it anymore -- but that wealth is a private subject, it's something that we wouldn't talk about, it wouldn't be appropriate to talk about at the Thanksgiving table. And therefore, we, as the people who are intending as generation one to leave wealth to the kids, we may never even share with them our plans. We're just going to work with our wills and estates guy.

Castoro: Yeah. You know, there's an attorney we work with, and she said, "I can't write an estate plan that fixes your kids." So everyone thinks that they're off to a great start and the communication is really strong and that the estate plan is solid and it won't create any hurdles. But we say, "Why leave that to chance?" Start having those conversations now so that you can start to build a shared understanding and everybody can hear it at the same time.

One of the things that surfaces in a lot of conversations about families is something called cordial hypocrisy. And cordial hypocrisy means, everybody just nods their head, yes, as if there isn't any concern and everything is great. But then, when the wealth creator is no longer here to pull the strings, things start to dissolve fairly quickly and cordial hypocrisy evaporates. What's left are some pending conversations that they're not quite sure how to have.

Gardner: So when wealth ends up not successfully transitioning, some of the time, indeed, it is squandered, it is poorly managed. It was not properly taught, I guess, how to continue this or what Mom and Dad or Gramps was doing. But a lot of the time, as you're pointing out, if you don't have this total family involvement, it can end up with infighting, really bad blood, like the worst thing that you would never have wanted to think you were spawning, as gen one, making the decisions for your descendants, you would never want to think that it would come to that, and yet it does.

Castoro: It does. And you know, a lot of families are reluctant to include the spouses or the children. In our work, we always include the spouses. And sometimes they are the ones that even the keel. When we involve the kids, let's say, 21 and up, they're the ones that have the most innovative ideas and solutions. So there's a rich ground, if people know how to include those voices, that can really make a difference in how successful the transition is.

Gardner: And I think that leads into the second factor that frequently attends these successful transitions. Amy, you and Roy write about a process that integrates what the family members learn together.

Castoro: Yeah, absolutely. So as I said earlier, people don't just inherit the wealth, they inherit the communication practices. And so our process really does add some more tools to the toolbox, so that families can have more confidence that those conversations are going to go well. Big part of what we do.

Gardner: And in fact, the bulk of our interview, which is coming up, we're going to go down a checklist together. And this is going to be the wealth transition checklist that's in the first third of the book or so. And this will be positive affirmations that you want to be able to say, 10 of them, about your wealth. And the more yeses you can give yourself, and we'll all be scoring at home, the better you should feel about where you're headed. And any nos you're going to want to pay attention to. So certainly that's going to be some of the process of integration that you and I are going to share together.

But let's go briefly to No. 3, the third factor frequently there when things work, and that's that the learning and practicing of family skills occurs well. Skills like, openness, accountability, unity, the list goes on.

Castoro: All families want to be able to have open, honest communication. In other words, it's got to be safe for the next generation to speak truth to power. And sometimes that's not safe until somebody has a conversation about how it's not safe. So we're really working with families so that they can have conversations in ways that open new possibilities, where conflict is actually generative, instead of being afraid and not having the conversations, falling into certainty or hiding from the conversation, just moving from pretense. This is really what we're speaking about when we talk about cordial hypocrisy.

Gardner: Now, Amy, I'm conscious that the work that you do, and you're, kind of, indicating it there, which is coaching as much, I mean, it's facilitating conversations. This, again, is not the grandmother or grandfather of the family calling everybody and up at the white board and running it. It's often that you have a neutral, third-party, skilled facilitator to enable families to challenge each other and be open. And so, I know that's some of where we're headed later in our talk.

But I did just want to double-check. Your work is typically with very high-net-worth families, but you and I know that all of this is relevant to probably anybody listening if they have something that they want to leave to someone else.

Castoro: Absolutely. It applies to every family out there. There's an interesting statistic out there that 75% of families want their wealth to be a source of opportunity for the next generation. It doesn't matter how much, but everybody wants to try to leave their children something. The challenge that a lot of people face is that only about 20% have taken any action to do that. And so that's really why I am so excited to be on the program, is to keep raising that awareness of how important it is to prepare the family for the assets, not just the assets for the family.

Gardner: Thank you very much. And, Amy, before we move on, give us just a quick skinny here on the Williams Group and typically who are your target clients, who do you work with, what does your job look like?

Castoro: We are a coaching organization where we have about 28 coaches across the U.S. We're all trained in a very similar way. We all have the certifications necessary, many of us have run our own business in the past. The people we work with tend to be first- or second-generation wealth, and they're looking at how to transition this successfully. Most of our clients are north of the $20 million mark. And some have already sold their business and they're saying, OK, who are we now? We no longer have a family business; how do we start giving back to the community in powerful ways? So they might be looking at how do we create new governance structures? or they might be looking at how do we set individual family members up for their own careers or their own jobs? And those may or may not be paying positions.

Gardner: So before we move to the wealth transition checklist, I do just want to say that, obviously, a lot of us are nowhere near $20 million, and that would be highly aspirational, and yet a lot of us do aspire to create real abundance in our lives over the course of time. And I know that there are some people listening to us right now who are north of that figure. But whether you're there, anywhere near, or will never get there, a lot of Amy's lessons here about openness and conversation and what happens after you're gone, on behalf of those that you love, and what you're doing to them or not based on how you're conducting yourselves, this is timeless, evergreen. It works for anybody in any country. In fact, I know that 70% figure that Roy figured out, Amy, it's not bound to just the United States of America or any given niche. This is a universal truth.

Castoro: Absolutely. Yeah, this is a phenomenon that happens, you could say, all the way back to the prodigal son, but every culture has its own language. In Italy, they have words that say "from the stalls to the stars to the stalls again." In China it's "teacup to teacup." In the U.S. it's "shirtsleeves to shirtsleeves." So it's a phenomenon that affects every family, because it's addressing the human element.

Gardner: So well put. And now let us indeed transition to the wealth transition checklist. Now, again, in the book Bridging Generations, this is in about the first-third of the book. I'm assuming it's like Preparing Heirs, the one I've read, Amy?

Castoro: Absolutely. Yes.

Gardner: All right, good, good, so that works. And so, there are 10 affirmations that you want to be able to say yes to. We're going to proceed through them one at a time, maybe one or two minutes a point, just to kind of give our listeners a full look at the waterfront of what they're wanting to say yes to. And so, let's get started. Ready, Amy?

Castoro: I'm ready. Thank you.

Gardner: Awesome! Okay. No. 1: Our family has a mission statement that spells out the overall purpose of our wealth.

Castoro: Great question. Because most people will say, "Yes, we all share the same values, we grew up in the same house." But actually, you'd be surprised to learn that many don't, especially when we start looking at the next generation. Right now, we can say they're really all about being able to share information and transparency, but the first generation might be holding things a little closer to the vest. So it's really useful to take some time and really look at what are our values as a family? Because we all know values drive action. Important to include the voices of the next generation and not just build the values out as the wealth creator.

Gardner: And so it's that crafting of a mission statement that so many corporations, NGOs, actually so many organizations of all types try to do for themselves. I've sometimes said, for our country, America, what are our core values? What's our mission statement? But you're taking it right to the family level, and you're talking about the family's wealth.

Castoro: Absolutely. And those mission statements have to include the voices of the next generation. Otherwise you're just going to come back to that cordial hypocrisy with a lot of heads nodding, but then when you're not here anymore, unable to actually implement it. Some of the values that we see that shape those mission statements usually are very similar. They just might be expressed a little bit differently, maybe education is important to Mom and Dad, it's also important to the next generation, but it could be a different form of education these days.

Gardner: Okay, great. So that's No. 1: Our family has a mission statement that spells out the overall purpose of our wealth. That, you want to be able to say yes to. So dear listeners, wherever you are, and we may not just be talking about 2020, we might be talking to you 25 years from now, I want you to remember 25 years from now, that you need to start with an overall -- and Amy has really double-underlined -- making sure all family members, including the young ones, are part of that mission statement creation.

Okay. No. 2, Amy: The entire family participates in most important decisions such as defining a mission for our wealth.

Castoro: So here, obviously, we're talking about the mission, but we're also talking about things like philanthropy. That's a big conversation in families. And many times, Mom and Dad think that they should be the ones making that decision, because they made the wealth. And secretly, they're hoping that the next generation wants to participate in that, and sometimes they invite them to participate in that, but actually, the next generation has a very different view, very different perspective on what that looks like.

So the more conversations you can have around the dinner table about big decisions, even when the kids are pretty young, you can start shaping and framing the kinds of narratives and ways of making those decisions for the whole family.

Gardner: Can you give an example maybe of some of the coaching you've done where everybody was thinking one thing and then somebody said, maybe a young person said something different at the table, and everything changed?

Castoro: Sure. That happens almost in every family meeting. We were working with a family where Mom and Dad thought that all of the wealth was going to go to a Jewish community foundation and they really didn't think that the next generation wanted any part of that. When we went around the room and we asked each of the kids where they would generate or donate their wealth to, every one of them said, you know, I hadn't thought about the Jewish community foundation, but since it's so important to you, I'll give some percentage there and the rest I want to give to other sources.

One kid decided that what she wanted to do was fund an at-risk youth program where the younger people in her community would have a shot at something other than a life filled with gang violence, modeled after some other programs. It's turned out to be a very successful one. Another one of the kids decided she wanted to get a bus, an old bus from the school district, fill it with groceries, and invite kids from a lower-income neighborhood, that if they could learn three things about nutrition, they could leave with a bag of groceries.

So since these young women had a passion and a commitment to taking care, Mom and Dad were willing to support those ventures as well as themselves. And they've become very successful programs.

Gardner: And, Amy, what is going on there? Why does it work better when you actually listen to the next generation's desires around their philanthropic goals? Why does that tend to work?

Castoro: Because they own it. The kids really own it, and they get excited about it. We had another situation where the dad said, yeah, we created this great program, we put my daughter in charge of the education component, then they had a family meeting to talk about the education component, and sure enough, the daughter didn't know anything about it. So she never really bought in. So when you get these next gen really excited, amazing things happen, because they know how to network, they know how to make it happen.

Gardner: Checklist item No. 3 that we all want to be able to say "yes" to, to have confidence we're going to transition our wealth well. And that is: All family heirs have the option of participating in the management of the family's assets.

Castoro: Key word is "option" here. I've spoken with an awful lot of next gen. Because they're first born or because they're male, they don't have a choice, they have to go into the family business. And frankly, that leads to trouble, and in many cases, big trouble. So letting family members know that the way they contribute doesn't have to be working in the family business, could be other ways of contributing. But "option" is the key word there.

Gardner: It's funny, because when I read that out loud, and even as I read in the book, I was assuming it was more about, like, picking stocks, but really, [laughs] the management of the family's assets, obviously, so often families that have something have a family business that they've started. And so that's really the management of the assets that you're talking about more often than not. Even though those of us on Rule Breaker Investing are all about, "Oh, so we're all picking stocks and putting it in the family portfolio." But that too, right?

Castoro: Absolutely, that too. The biggest burden a lot of these kids face is the fear that they're not going to manage the wealth as well as their mom and dad. So asking them, how would they like to learn? What would be a good way for them to learn? That'll get you off to a good start. When we work with families, very often, the next gen says they want to learn through impact investing. And they pick what that would look like, they work with an advisor as a team, so that they start to learn how to have some of the challenging conversations within their own generation.

Gardner: No. 4: Heirs understand their future roles have bought into "those roles," and look forward to performing in those roles. And one of the things that I took away, as I read this section of the book, and it's really helpful, and that is, we don't all have to do everything, all the things. Some of us don't feel prepared to make good tax management decisions, or some of us might not facilitate a family meeting very well. So it's comforting to be reminded that we can play the roles, as you're saying here, that we want to and that we would do well, and we can try to hire out or bring in outsiders to fulfill functions that we just don't think we would do well.

Castoro: Perfectly said. And sometimes we have to decline the role. Very often, we see that the oldest born becomes the executor. And the executor has no idea what that role really entails. Or one of the daughters or the siblings say, "You know what, love my brother, but all he ever did was cheat in Monopoly, so to be honest, I'm not sure I want him to be the executor." Fair claim. [laughs]

So it's really when the next gen understands the requirements, the competencies, and they have a shared standard on what that role is. There's lots of roles. Even being a beneficiary is actually a role. And so, how does the family have an open and honest conversation about what it means to be a beneficiary in that family? And that will open the conversation around entitlement, which is kind of an interesting one.

Gardner: No. 5: Heirs have actually reviewed the family's estate plans and documents. And again, when I first came across this material, it was a little counterintuitive to me, Amy, because I just come from the mold or mindset that, you know, you write your will and it's given to your wills and estates person and they keep it in a vault somewhere and it's private and it's all going to be a big reveal -- am I seeing Hollywood movies here? -- a big reveal at the family library where everyone is sitting down. And then this person surprises everyone with whatever he or she says. But that's not the way [laughs] to do it, right?

Castoro: No, it's really not. You know, when we say this, we don't mean they need to know numbers. It is useful if they can know the plan.

So Roy, as a former NFL player, he used to use a football analogy that I think is really helpful. So there's the offensive line. You've got the heirs, you've got the traditional advisors, you've got your estate planners, the banks, the CPAs, the lawyers. Everybody there knows each other's job and they know their own job really well so that when the day comes and the estate, or call it the ball, gets passed to the next generation, that whole line knows exactly what they need to do.

But guess who's going out to catch the ball. It's the heirs. And they don't know the plan, they don't know where the locker room is, they don't know who they're even playing against. And who they're playing against could be very well-meaning people. It might be somebody disguised as Bernie Madoff. It might be somebody they went to school with that has a really great investment idea. So they're playing against a team that knows the rules, but these guys have never even seen the playbook.

So it's really helpful when you can get them all in a room together, and say, "Here's my wish. Here's the purpose of our wealth. Here's what I would like to see happen. Here's what a successful transition looks like in my mind." And then they can, at least everybody is organizing around the same playbook.

Gardner: Spectacular analogy. I mean, I am a sports fan, so it maybe works extra well with me. But, Amy, that is so illustrative and so eloquent. Thank you for that.

You know, one thing about reading the documents; I mean, who wants to do that? They feel like legal documents, they sometimes number in the dozens, if not, I don't know, hundreds of pages. I'm just imagining in my head right now. Nut I guess I'm happy to say my dad is still alive, so I haven't gone through this yet, but it doesn't sound fun at all for me to sit there and read the family's estate documents.

Castoro: No. You know, it's a really useful conversation to ask your dad, what is the purpose of his wealth? That will drive a lot of the decisions that you ultimately make. Many estate attorneys have said to me, you know, it's the cover page that separates the estate plans, everything below the cover page is pretty similar. So estate plans don't have to be that complicated, and they're actually not, but what the driving factor, and where I think the most leverage comes from, is understanding the purpose of the wealth and being all on the same page about that.

Gardner: All right. Wow! Since we're using sports analogies, and Roy was a former NFL player, we're going to call that halftime, because we just went through the first 5 of the 10 items on this checklist.

I should mention, in the book Bridging Generations, this is not the only checklist. I wanted to lead with one that speaks to the people who are there, a lot of our listeners who are working professionals or older and are ready and are making these kinds of decisions, so that's why we're going through this checklist, but there are several others, including, if you are the next gen, what do you need to be able to say that you're ready to do? And so that's all part of this book. But, Amy, and I are focused here for this reason.

Anyway, it's halftime, so I'm going to really quickly say back the five that we've just covered. And you're scoring at home. Can you say yes to these five assertions?

  1. Our family has a mission statement that spells out the overall purpose of our wealth.
  2. The entire family participates in most important decisions, such as defining a mission for our wealth.
  3. All family heirs have the option of participating in the management of the family's assets.
  4. Heirs understand their future roles, they have bought into those roles, they look forward to performing in those roles.
  5. Heirs have actually reviewed the family's estate plans and documents.

Now, Amy, before we kick the ball off to start the second-half, are there any other final reflections for you about these five or do we cover it all?

Castoro: I think we did a great job covering it. The focus we're always paying attention to is how does the next generation see that they can be a contribution to these conversations?

Gardner: And that really is, I think for a lot of people, an eye-opener. And yet it is so logical and so commonsensical once you read it. And of course, having an expert like Amy say it to us also reassures us that [laughs] this is clearly something we should all be doing.

Okay, let's start the second half. No. 6, Amy: Our current wills, trusts, and other documents make most asset distributions based on heir readiness, not heir age. This one, another eye-opener, but smart.

Castoro: Many people build into their estate plans an age at which the kids would then receive the wealth. And obviously, that can be 30, 35, 40, 45. I've met 60-year-old people who self-proclaim they are not ready to manage their assets. And so we love to invite the conversation with families about what "ready" means. And it's not just the wealth creator's assessment of ready; it's the next gen's assessment of ready.

In some families, ready means you've been able to hold down a job for a while or that you've been able to grow your own portfolio. Maybe that ready means that you've gotten certain certifications or you're able to ask the right questions. But what's important is that each family have a conversation about what ready looks like in their family. What that does is it levels the playing field, so that the next gen knows what's going to be expected of them and what they need to do to prepare to be able to handle it.

Gardner: One of the things that you and Roy say in this section of the book is, understandably, if you are a working professional in this wealth management space, let's say a tax accountant, it's awfully easy and probably preferable just to say: "Amy receives this money at the age of 30, so, Amy, here you are, this is your money." We all do, kind of, latch on to ages, dates, numbers. And it's a real rote action for a lot of the wealth management industry just to have it happen that way. So they're not going to fix it, right? It needs to be you and me thinking through our own wills and estates to say, what does readiness this mean? And it's not always, it can be, but it's not always the age.

Castoro: Absolutely. And it's more than just what it means, it's, what does it look like? What are the actions, what are the behaviors that set the bar that declares, yep, in this family, here's the standard of what ready looks like?

Gardner: And isn't it interesting, I have some pretty precocious younger siblings myself. You know, the assumption is probably that Dave, as the oldest, needs to do this thing, but it might be that one of them shows reading before I do in various -- I'm sure enough they have -- in various contexts. And so, it kind of redefines families and how leadership happens.

Castoro: Yeah, no question about it. It's the answer to that concern, which a lot of people have, which is that, if I transition this wealth, will it derail the next generation's motivation? So if that is a big concern, then having a conversation about what "ready" looks like might include conversations about what's their purpose in life? What do they care about?

We've worked with many different families where the next gen may have to actually cover all of their bills, and in some cases they don't have to cover their bills. They're able to enjoy the gift of the wealth, but still, they have to have some purpose or contribution that they're making in the world, and that can be in many different forms.

Gardner: And so, if you've been able to answer yes to the majority of these questions, give yourself a gold star at this point. But a number of us might have some nos, and therefore, some homework to do.

Let's get to No. 7: Our family mission includes creating incentives and opportunities for our heirs.

Castoro: In one family, we worked with -- a family that was very large; there were eight siblings involved. And one of the spouses really didn't feel very comfortable in the conversations, because they didn't come from a lot of wealth. They weren't really used to being around wealth. And so, they didn't ever participate much. Finally, we got to the point where we did start talking about philanthropy, and we said so, what do you really care about? And he said, "You know, all I care about is the community soccer team. We have a bunch of kids there, and they really don't have much of a uniform or really any equipment to play with." And so, the wealth creator stood up and said, well, if that's what you care about, that's what I care about. Whatever you give to that community, I will double. And so today, that group of youth soccer has their uniforms, they have equipment, but the biggest contribution has been that the spouse can now find a way to be part of the family other than having to earn a lot of money.

Gardner: That's such a great example. And, Amy, obviously, your work probably just loads [laughs] you up with innumerable examples and stories. And thank you for sharing those with us this week.

No. 8 is: Our younger children are encouraged to participate in our family's philanthropic grantmaking decisions. Now, earlier you did speak to this somewhat by just mentioning philanthropy, and you just gave a great example there. But I think the key phrase here for No. 8 is "our younger children."

Castoro: Yeah. We worked with a family where there were two young girls and they had heard something about a certain, kind of, a species in Africa that was endangered. And so they decided to raise money with lemonade stands for how they could help save these chimpanzees. Today, there is still a fund initiative happening in their grammar school to support this particular species of primate. And it all started at a very, very young age, selling lemonade. It was because the Mom and Dad could really listen to what these girls cared about and be able to take some action and support it.

In another family, every time somebody brings home a gift or a stuffed animal, there's a conversation about which one do you want to donate to the children that might not have one. So with every one that comes in, one goes out.

Gardner: Amy, were you raised this way? Did you have, as a five-year-old or a nine-year-old, did you have a family that said, hey, let's talk about philanthropy?

Castoro: Not even close. We were driving Volkswagens that didn't always have a seat, and we sat on an egg crate, to tell you the truth. But [laughs] we enjoyed the challenge of learning how to shift gears while sitting on an egg crate, so I'm actually pretty good at it. [laughs]

Gardner: Love it. And of course, since you and I are about the same age, I mean, we didn't even have seat belts back then, in some cases, or even care. [laughs]

Castoro: [laughs] Right. Yeah. These were not conversations I grew up in, but there was a conversation in the family about how are you going to be a contribution? How we're all going to go through this together? And so what do you see you could do?

Gardner: And what a wonderful thing. I mean, I will say, in our family, I don't think that this was a big emphasis. We were generous, I would certainly say that my parents were generous, but we were not invited in or we were not part of a conversation. We were not excluded; it just wasn't a common practice. And I think what's great about No. 8 is, again, regardless of how much or how little you have, this is a great thing to do for any child, and the younger, the better, it just becomes a cultural thing. It has nothing to do with money when you think about it.

Castoro: And these kids are much more globally aware than I think we were, because of the way the media works. Plus there are great shows on TV. I don't know if you've heard of Succession or even Yellowstone, but these are stories about wealth transition. And so through the media, we're finding the awareness of this is just unbelievably in everybody's mind, especially the next generation.

Gardner: Yes. And the more dark the comedy, the better, [laughs] for something like Succession. But, yeah, no, I mean, you're right, it is an interest. You know, I think I remember at one point in the book it was mentioned that maybe the child doesn't make their best decisions; like, they're given some responsibility and they make a poor philanthropic decision. So part of the culture of the family can and should be to just reflect on what happened that year with that gift and why it didn't work and make that seven-year-old smarter when she turns eight as she thinks about the next way to give away something that year. So it's really a process of education as much as anything.

Castoro: Many families will invite the children to do a little presentation on why they picked what they picked and then be able to say, "We made a couple of phone calls and we learned this is how much actually went to the bottom line." That might be the next gen. But the question is on the surface of the conversations, and so they're learning at very young ages what to pay attention to. We had one family where they asked the young girl if she wanted to donate to the same organization. And she said no, and they said why? And she said, "They didn't say thank you." So there you have it. She said, "You know what, I didn't really matter. They didn't say thank you, and so I decided to give it somewhere else."

Gardner: Just great. I mean, I love it. All right, No. 9 and 10; homestretch.

No. 9: Our family considers family unity to be just as important as family financial strength.

Castoro: You would think that would be an easy "yes." We require two things when we start to work with a family. The first is that they're all willing to learn, because as I said, we're really looking at building new tools and new skills. The second thing is that they care more about the family unity than they do about the assets. When push comes to shove, this is where that question really matters.

We worked with a family of four brothers. One of the brothers decided he wanted to get out of the business before the other brothers. In order for him to be paid out, it was going to be a 20-year period, because the exit strategies weren't very strong. And so when push came to shove, he wasn't willing to wait the 20 years. It went into litigation. And so, he was putting the assets that he "deserved" before the well-being of the family. It ended up really having a disastrous effect on the family business.

And so we're really saying to families, "How do we make sure that we stay centered and grounded that the purpose of this wealth is to provide opportunities for their families, not just more money?"

Gardner: And I'm curious how this might have changed some over time, Amy. I'm thinking about a show, going back to shows on TV, like Succession, shows that I enjoy, Modern Family, which is a very famous show here in the United States. And one of the things that it makes evident is just the changing nature of the American family and what we think of as family, and maybe the multiplicitous viewpoints -- I don't know if this is a myopic and hopelessly uninformed viewpoint or if it's actually accurate, is it fair to generalize the back in the '50s they were all more unified and they all, kind of, understood each other, but now in 2020, we're just all over the map, and so these conversations are even more important? I don't know if that's a fair generalization or not, but I think you get the point.

Castoro: I, absolutely. One of the first questions we ask a family is what is family? Does it include adopted children, is it same-sex marriage? What is family for your family? It's a great conversation and a really important place to start, requires some skill to be able to navigate, because not everybody might like the answers. But, yeah, "what is family?" is a great question.

Another really great question is, what is wealth? Is wealth just money or is wealth our network, our identity in the community? Is it who we are as a family and what we care about? Is it our education? So broadening the definition of wealth will sometimes make these easier conversations.

Gardner: Those are just beautiful sentiments. I love both of those beautiful questions.

Thank you, Amy. Okay, No. 10. And I'm just guessing, because I take some pride in my listenership. I bet, at least one of us has been able to say yes to all nine of them. I'm not that person, but at least one of us probably has been able to say yes.

And by the way, the end of every month for Rule Breaker Investing is our mailbag, and so I'm quite sure we're going to get some great notes; [email protected] is our email address. You can follow us on Twitter @RBIPodcast. I'm really looking forward to next week's mailbag, because I bet I'm going to hear from the person who got a 10 out of 10. I love exemplars, I love stories of success, that's what I celebrate on this podcast.

And your book, that's the spirit of the book. We're not denigrating the failures; we're talking about what works and how to make it work and how to make me be one of those people who make things work.

No. 10, Amy, the concluding one for our wealth transition checklist. We communicate well throughout our family and regularly meet as a family to discuss issues and changes.

Castoro: Many families we work with say they have family meetings, which is wonderful. The way to take that meeting to the next level is to have conversations not just about the estate or even the finances or even the business but to talk about what everybody is up to in their lives. So there again, we're always bringing in this human element so that the family meetings are a richer conversation about who we are becoming as a family.

When we look at the families that are doing this well -- we put them into a traffic light sequence. There's the green families, the yellow families and the red families. The goal is the green family. And those families are where they can work through the challenging conversations. They have a list of the missing conversations or the pending conversations they want to have, and they can move through those successfully. They really enjoy getting together, and they do it fairly frequently. The family members are all pretty aligned on what they care about and what their values are.

And finally, I'd say, openness and honesty are predominant. They feel like they can speak up when they need to speak up. So that's what we mean when the family communicates well.

Gardner: And I have to say, I can't give a yes to this one myself, because I don't really have a good, disciplined approach to family meetings. And I say that now, having, I hope, mostly succeeded as a parent over 20-plus years. And yet, I don't think we ever did this systematically, and we certainly didn't do it about family values and wealth, specifically, and where things are headed. So I'm conscious I can do this better.

And, Amy, maybe since you've conducted a bunch of these meetings, can you either paint a quick picture of what a successful one looks like? I know you just gave us some good advice there. Or maybe tips and tricks, dos and don'ts around family meetings? Just make me a little smarter about this/

Castoro: Absolutely. The first thing I would say is, do your homework. Before you go into that family meeting, ask everyone who's going to be attending what topics would they want to cover and how would they cover them? That way you're getting input from the whole crowd that will be there.

The second thing I would say is, when people come to the meeting, ask them what they'd like to accomplish by the end of the meeting. So at the end of your time -- keep the first one fairly short, maybe an hour-and-a-half, maybe two hours -- but make sure everyone checks in with what it is that they want to accomplish.

The third thing you'll want to pay attention to is really giving each person a job during the meeting. So have somebody that's tracking the commitments the family makes or the next, the to-do items. Have somebody else tracking the time. Give somebody else the authority to say, "Hey, we're off track. Let's come back on track." So giving everybody, sort of, roles.

Another thing that I probably really pay attention to in closing the meeting is a tune-up. You want to be able to, say, leave, I'd say 15 minutes, for what worked really well in the meeting and what they would like to see happen differently next time. What would be even better yet?

Gardner: Yeah. I think the aim would be to, for the next one, to feel genuinely excited about it, to feel like it's worth your time and it's going to be interesting and it's going to go well and it's going to build connections. I have a feeling some of us are operating more in a neutral temperament where we feel duty bound to have that thing, or we may really not be looking forward to it. So I suspect it's not easy to get there, Amy, but feels like that's kind of the place to get.

Castoro: Absolutely. That's where you want it to go. And you also want to ask the audience, what does a successful meeting look like for you? For you, that's a successful meeting, for other people, might be something different. But everybody has a voice in shaping that is what's important.

Gardner: All right. So you just heard 6 through 10. I'm just going to read them back out again, so you can score yourself at home and come up with your final score.

No. 6 was: Our current wills, trusts and other documents make most asset distributions based on heir-readiness not heir age.

No. 7: Our family mission includes creating incentives and opportunities for our heirs.

No. 8: Our younger children are encouraged to participate in our family's philanthropic grantmaking decisions.

No. 9: Our family considers family unity to be just as important as family financial strength.

And No. 10: We communicate well throughout our family and regularly meet as a family to discuss issues and changes.

And it occurs to me, as I read several of those, these aren't even really about money, are they? [laughs] These are just about family and about best practices and something about love too.

You know, Amy, beyond your book, Bridging Generations, which is what we've covered on this week's podcast, if I've really enjoyed hearing from you and I'd like to find out more about Williams Group, how do we reach you?

Castoro: We have a website. is the best way. And we also publish a lot. We just had a couple of articles published in Harvard Business Review. You can also connect with me on LinkedIn, Amy Castoro. We tend to put a lot of content there as well.

Gardner: Before I let you go, any final thoughts to share with our listeners?

Castoro: Yeah. You know, there's a statistic out there that says $68 trillion is going to change hands over the next 25 years. That's a staggering amount of money. As we've been discussing, David, the dominant variable in what makes a successful wealth transfer is the family itself. The more time they can have with the wealth creator, learning about the purpose and the actions to support their vision, the better off and the more successful the transfer will be. If families don't transition that wealth well, we lose a huge opportunity to improve the world we live in. When families stay together, their assets can change the world we're in.

And so my closing comment would be please take action now. Don't wait to have these conversations before it's too late. The most successful families, the 30%, they're able to do it because they're taking action now. The ones that take the time to learn the skills they need to learn to be able to have these conversations go well. So I'll leave you with: Don't wait. Now is the time.

Gardner: Thank you, Amy. You know, not all of us have so much to leave to the next generation. We aspire to do so. And so, maybe we don't get to hire someone as talented and experienced as Amy to have us oversee that, but all of us got, this week, to learn and hear from someone who does this all the time with multigenerational families trying to make the best, most successful, most loving decisions about their wealth.

Amy Castoro, I really want to thank you again for joining with us on Rule Breaker Investing, discussing your book that you co-authored with Roy Williams, Bridging Generations. Foolish best to you.

Castoro: Thank you, David.

Gardner: All right. Well, thus concludes Authors in August. Now, August itself isn't over, because certainly there's one week left, and the final Wednesday of every month is our Rule Breaker Investing mailbag. So whether you have reactions -- I sure hope you do -- to what you just learned from Amy Castoro or you'd like to share your score or any reflections, whether you're a first-gen wealth generator or maybe a third-gen wealth inheritor, everybody in between, I'm really looking forward to some of your stories I'm going to learn from you. Next week, of course, we'll be talking about Completing Capitalism and Influenza as well. So everything goes for this week's coming mailbag for Authors in August.

In the meantime, stay Foolish out there and wash your darn hands! Fool on!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Gardner owns shares of Amazon and Walt Disney. The Motley Fool owns shares of and recommends Amazon and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney, short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

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