Value of a Rear View Mirror

Every investment decision, every wealth protection policy & every human capital development comes into 20-20 clarity in the rear view mirror. We become geniuses because all the risks cannot be properly assessed unseen & forgotten in the mirror. The reason for this anomaly is in the mirror: right is left & left is right. Follow the link below to spend 2 minutes listening to Paul Harvey’s April 3, 1965 Commentary. “It cannot happen in America or in my Family” is a hackneyed phrase, full of bravado’s conceits. Follow the link, listen to Mr. Harvey, discover why family stories, vision and core values are important to a family’s legacy.
Paul Harvey April 3 1965

The Tompkins family selected their corporate trustee in the hopes it would support the family’s legacy fulfillment. One important relationship was a Private Banking capability and its social recognition of competent financial and investment decision making. Unfortunately, after more than 50 years, the relationship went awry when the Chevy Chase Bank was sold to CapitalOne and now the parties are at logger heads. The Chevy Chase Trust enjoys defending itself with trust assets while the family members contest using their private funds.

“The 10 Tompkins grandchildren want to fire the trust company because they are unhappy with the financial performance of their inheritance, which yielded an annualized rate of return on investment of less than 2% over the past six years, according to lawsuit. Three other grandchildren aren’t part of the lawsuit, nor are the other generations who are beneficiaries of the trust, though the suit contends that “most of the remaining beneficiaries of the trusts also have no confidence” in Chevy Chase’s performance as trustee.” Follow the link below to read the full Wall Street Journal story.

Simon Johnson: U.S. Tax Rates Must Rise 3/23/2012 9:57:05 AM
In an interview with WSJ’s Jon Hilsenrath, MIT professor Simon Johnson calls for higher income-tax rates as part of a “fiscally conservative” plan to shore up the U.S. budget in the long run. “We have lost track of the fact that deficits do in fact matter…,” he says. Cannot believe this declaration of conventional Keynesian Wisdom.

People modify their behavior to cope with and solve current cash flow circumstances. This is generally known as dynamic scoring versus the static scoring promoted by Mr. Johnson.

The solution is found in We, The People, taxing the SPENDING habits by retention of HIGHER Retention Rates of our own money . . . or if we follow Mr. Johnson’s recommendation, tax Congressional spending at higher marginal rates! Follow the link to listen to Mr. Johnson’s comments.

Life Insurance and annuities are excellent tools when placed into the context of a Family’s Succession Plan. Generally, they are “SOLD” to solve an immediate need rather than support a Family’s Legacy Plan. They may be appropriate for Buy/Sell Agreements for Closely Held Businesses, Generational Split Dollar supporting “Selling to the Next First Generation”, Annuity Trusts , Charity Wealth Replacement, Supplemental Retirement Plans and Income Replacement Term policies.

Recently, FUTR’s Director of Insurance Programs, Don Kuhn, helped a client reconcile a portfolio of Term-Life and Disability Insurance policies. He was able to introduce a solution to provide a core estate in case of untimely death; a life policy that provided “income replacement” through age 65; and created a Critical Care Program for his spouse. FUTR’s approach is to support the fulfillment of a family’s legacy or succession plan rather than sell an off-the-rack product not tailored for a client’s specific needs.

Late this afternoon, Don suggested following this link to a news article reporting Hartford’s sale of its Annuity and Life businesses. Any one holding such a policy ought to consider the following:
1. Many existing policies will be paying interest and charging on a “current basis”. The buyers of Hartford’s business can change the interest paid inside the policy unless it is guaranteed.
2. Acquiring companies often raise cost of insurance rates and/or lower interest rates to help subsidize their purchase of the company. This can change the parameters and dynamics of the policy’s illustration when issued.
3. Service levels may be reduced or outsourced . . . the policies may become orphans since your professional adviser may not be appointed by the acquiring company.

Please call or write to us to request a Second Opinion or a Review of your Hartford Annuity and Life policies. It will be an opportunity to update your family legacy and succession plans as well.

Hope this is helpful as you consider ways to improve the management of your family’s wealth.

Core values matter in the management of family business operations and investment. There are taboo topics, such as money – untimely death, especially our own — sex and religion. All matter because these topics generally describe how we choose to live. Core Values are the guideposts that keep us on the path and not hurtling off the cliff. Follow the link to a Wall Street Journal OpEd on Paul Ryan’s budget proposal — it is replete with taboo topics; however, the values regarding prudence, good stewardship and protecting one another’s interests will prevent our legacy becoming the headline, “Thelma & Louise Drive Off Cliff in Wild Adventure”. Ryan’s Budget

This link is to Dr. Jeffrey A. Singer’s description of anticipated medical practices that discourages independent thinking and the use of intuitive knowledge that were the hallmarks of the Hippocratic Oath/Ethic which has produced our current experience of the practice of good medicine stewardship.

Private property’s wealth is the summation of the 1,940 hours spent working plus deferred gratification. In case you are wondering, the 1,940 is the time spent working each year less vacation, holidays and sick days. Time represents the sum total of unleveraged real capital employed each year. The amount accumulated through your work due to deferred gratification is your accumulated family wealth that leverages the returns from the hours spent at work.

“Trust Fund Babies” experience atrophy of ambition by way of a regular trust dividend check. Entitlement’s roots expand unless this cash flow is invested in the pursuit of a dream that brings them happiness and reflects credit back to them.

For this reason, FUTR encourages families to sell assets to “The Next First Generation”, to permit that generation to prudently take risk and enjoy its rewards. This subtle change in estate planning promotes the growth of family wealth and ensures the survival of core family shared values . . . its family’s legacy.

Preserving family wealth and legacy requires education and commitment. The family’s head learns to become a mentor in preparation as a willing Seller. The Next Generation(s) learn what has made their family successful in operating their business and investment interests. The Senior Member’s guiding insights encourage their Buyers to successfully adapt the family’s process to current market conditions.

The time invested developing a family’s human capital generates a 10:1 return over their investment time horizon. Time working plus deferred gratification are leveraged to become the summation of a family’s wealth.

“A Cure for Selfishness,” March 26, 1997, James Q. Wilson:

Perhaps the most powerful antidote to unfettered selfishness is property rights. If we are grazing cattle, we will conserve the land if we own it. If we are catching lobsters off the Maine coast, we can restrict over-fishing by allocating space to groups who informally “own” each space. If we want to conserve elephants, we should let people own the elephants. If we wish to water our rice in Bali, we do better if each village has ownership in a part of the water. If we want to conserve our country’s oil reserves, we do better if the reserves are owned by firms than if the government “controls” the whole deposit.

Mr. Wilson’s legacy is wisdom we can embrace and use.

The article reports Jerry Brown’s efforts to persuade the Potomac Pols to reduce regulations preventing less than $5.00 Co-Pays for California Medicaid which saves the state $300 million. This is similar to one of the complaints against King George found in the Declaration of Independence.