According to a report from December 2023 in Kiplinger Personal Finance, the United States is currently experiencing the “Great Wealth Transfer,” the largest asset shift in history—a staggering $84 trillion, to be precise. Led by baby boomers, individuals are handing down their assets via wills, trusts, financial gifts, and property holdings to younger generations, who include Gen X, Millennials, and even Gen Z.
To appreciate fully just how large a windfall that wealth represents, consider the US national debt made headlines the world over when it turned over the $34 trillion mark earlier this year. Boomers alone represent 63% of the wealth to be transferred, or $53 trillion.
This tsunami of asset transfers includes individuals’ personal net worths as well as millions of businesses changing hands. Financial planners, estate attorneys, and business consultants have been awash in demand for services to help craft plans that ensure the smooth transition of wealth from one generation to the next, services collectively known as “legacy planning.”
As defined by smartasset.com, legacy planning is the en-vogue term to describe estate planning, a label from which the industry is recasting itself as many consumers consider it overly elitist or moribund. But beyond the name, legacy plans also hold substantive differences from previous strategies, including the more abstract elements of discussing the family values and ethics that the deceased wishes to be carried on or placing a heavier emphasis on philanthropy.
Nick Wilwerding, who took over as CEO of Bridges Trust on July 1, said people are increasingly looking to address elements that define and fund the building blocks of a person’s lasting legacy.
“Legacy planning at Bridges Trust aims to nurture family legacies, prepare future generations, and leave a meaningful mark on the community through philanthropic endeavors,” he said. “This approach helps ensure that our clients’ legacy continues to make a difference, extending beyond their time with us.”
The firm’s suite of services combines fairly well-recognized strategies for estate planning, such as trusts, with services targeting more specialized needs in the areas of philanthropy advising and outsourced chief financial officer services (OCFO).
“OCFO provides personalized financial services to affluent families, encompassing a specialized approach to managing the financial affairs of high-net-worth individuals and their families,” Wilwerding said. “We oversee complex family wealth. Acting as the family’s CFO, we aim to provide extensive strategies and a personalized approach, built to suit our clients’ family needs. Our team has long-standing experience and an understanding of financial complexities, and we are dedicated to helping our clients simplify their financial lives.”
With so much money in play, the assumption might be that people have adopted saving and legacy planning across the board but recent survey results indicate this is not the case. Motley Fool reported its May survey findings that revealed only 61% of non-retirees have a 401(k) and 20% have no savings whatsoever.
In its 2024 wills survey, Caring.com similarly found that only 32% of Americans had a will, posting the first year-over-year decline in estate planning since the pandemic. Four in ten of those who neglected estate planning did so because they felt they didn’t have enough assets to warrant it, the survey reported, and 25% of those without a will said they had no plans of ever getting one.
“Despite the benefits of early planning, individuals often postpone due to perceptions of complexity, procrastination, avoidance of end-of-life discussions, and simply lack of awareness about the importance of legacy planning,” said Marietta Luellen, Bridges Trust’s EVP of Trust. “While understandable, delaying these crucial conversations can lead to unintended consequences, making it essential to prioritize legacy planning that aims to secure wealth and family values for the future.
“Bridges Trust recommends initiating legacy planning as early as possible to fully leverage its benefits, ideally coinciding with pivotal life events such as marriage, the arrival of children, or periods of wealth accumulation. It is also important to regularly review your estate, tax, and financial plans to ensure they align with the client’s current situation, financial objectives, and legal requirements.”
The paramount importance of legacy planning can also be seen in the business community. According to a recent white paper by J.P. Morgan Wealth, 76% of business owners plan to transition over the next 10 years, representing 4.5 million businesses and over $10 trillion in wealth. Yet, the paper goes on to report, less than half of businesses overall have a formal succession plan and greater than 6 in 10 have none at all.
Failing to plan, as the saying goes, is planning to fail, and not having a well-defined, cohesive strategy can quickly bring about chaos, said Dave Nabity, founder of Nabity Business Advisors.
“[Legacy planning] primarily deals with people who run and own companies and have built them up over 20 or 30 years,” he said. “They’ve got a company where they really care about the management folks [and] they might have children in the business that they care about. They’re wanting to develop a legacy where they can take the business and transition it down to the next generation or position it in such a way that it can be marketed and sold to the marketplace in such a way that it provides a great blessing and value to the family when everything’s said and done.”
Consultants such as Nabity provide expertise on any number of operational or organizational matters from valuating a company for sale to forming a catastrophic plan that addresses business continuation in the event of the unexpected loss of an owner. He said his role is to be the objective voice to the C-suite, especially in multi-generational businesses, who often get stuck in the emotional mud that clouds judgement, gives emotions undue influence, and ignores impacted issues versus addressing them head-on.
“There are a lot of dynamics of what’s going on in a family business that go into this,” he said. “Sometimes the kids aren’t ever going to be ready to be in leadership, but the parents really hope they are, and so they keep hanging on to the idea that maybe this is going to work. They need outside people to come in and say, ‘Look, your child has got this kind of a skillset, and it may not be best applied in the CEO role.’
“Lawyers and CPAs are really not in a position to have these kinds of tough conversations. They’re there to do the legal work and make sure all the i’s are dotted and t’s are crossed and the legal and financial fundamentals are being followed. Business owners need somebody who is going to come in and have those heart-to-heart conversations with them.”
Steve Busskohl, CEO of Arrow Stage Lines, has known and worked with Nabity for 20 years during which time Nabity has advised his client on various buy-sell agreements, forming a management incentive retention program, and shepherding shareholders through buyouts. Busskohl said the key elements of their successful consultant-client relationship boil down to a few key fundamentals.
“We’ve been in business for 96 years, and we’re in our fourth generation,” he said. “We know how to operate a motor coach company. I think we were missing some of the best practices of the business and for this we needed good counsel.
“We look for people with high character and integrity and wisdom, and Dave really brought that to us. He had good connections in the community, and he was a very good communicator, who held me accountable. He had a servant-leadership style, which I thought was very effective.”
Nabity said this latter trait doesn’t happen by accident, but springs from a genuine caring about the success of clients and is one attribute that has allowed his firm to thrive for almost 40 years.
“The first thing I try to do in the initial meetings is see if there’s a relational bond that we can build with each other,” he said. “If you get clients that you really, really care for and you really care for their families, you want to do everything you can to help those people make better decisions. I try to have a humble approach to it all and show genuine love as I’m working with people. I think that helps build the trust you need to walk alongside the client and help them be successful.”
For more information about legacy planning, visit bridgestrust.com and nabity.com.
This article originally appeared in the August/September 2024 issue of B2B Magazine. To receive the magazine, click here to subscribe.
