Women In Family Business – The Importance of Clarity

By Patricia Annino, J.D., Thomas Davidow, Ed.D. & Cynthia Adams Harrison, Ed.D., LICSW

The Importance of Clarity

family business imageThe more you and your husband agree to treat the business as a performance arena in which preparation is everything, the more productive your child will be. Similarly, the clearer you can be in terms of creating structures, the better off your child will be when he does enter the business. Being proactive about creating routines through governance structures or through accurate job descriptions is very helpful. If your child is already working in the business, you and your husband can discuss how to create sensible structures with appropriate boundaries. Everyone performs better when they know what’s expected and what the rules are.

Be Informed-Be Influential – Points to Remember

  • If your husband resists talking to you about the business or is upset about something at work and won’t share why, don’t take it personally and don’t give up.
  • Men and women really are different in how they think, behave, feel good about themselves and communicate.
  • When you set a limit for your husband, you are actually encouraging him: You are telling him that he is capable of achieving his goals as a businessman, husband and father.
  • It is possible to find the balance between creating objective criteria for your child’s performance in the business and maintaining family harmony.
  • There’s a difference between granting your child the automatic right to work in the business and giving him the opportunity to do so.
  • Things go best when there is consistent communication between you and your husband and between both of you and your child.

 

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Effective Risk Planning

Image of a womanOn the topic of risk I just came across the Family Office Exchange white paper, “Securing the Future: Managing Threats and Opportunities Through Effective Risk Planning” (October 2009) and was impressed with how thorough this study is.

I recommend it to anyone who is advising high net worth families and/or family owned businesses. Its intent is to develop a process for managing risk to diffuse reactive, irrational decision making and puts forth the best strategies for managing downside risks while emphasizing the importance of capitalizing on new opportunities for wealth enhancement.

It is a wonderful roadmap for a proactive approach for risk management across the critical issues that families face. To quote Arie de Geus, the former head of strategic planning for Royal/Dutch/Shell, “nobody can predict the future, therefore one should not try. The only relevant discussions about the future are those where we succeed in shifting the question from “whether something will happen” to the question “ What will we do if it does happen?”

For more information about the Family Office Exchange white paper visit: https://www.familyoffice.com/knowledge-center/securing-future-managing-threats-and-opportunities-through-effective-risk-planning

My three key areas “at risk” for family business are family cohesiveness, business ownership and wealth management. Here’s a look at what they mean:

 

Family Cohesiveness

In the area of family cohesiveness, reputation or the family brand is at risk. Traditionally this risk was triggered by a scandal that leaked out to the press. The new way this risk is triggered is through the Internet. Videos on YouTube and comments on Facebook, Twitter and other social media networks can affect your client’s family’s reputation. They can be used in divorce litigations, custody matters and employment decisions. Once viral, it is hard to remove.

The younger generation, if not educated, is not mature enough to understand the afterlife omnipresent power of the digital era. A family risk-management policy should include education about the dangers of social media and a morally binding decision among family members to understand the consequence of social media on the reputation of the entire family.

Business Ownership

Another risk to family cohesiveness is the impact to individual goals and life plans.

Traditional risks included the illness, death or incapacity of a key family figure.

In the family business, the new risk is the increased work lifespan of the older generation, which results in the delayed succession of the middle generation. With the older generation in good health and working longer, the individual goals plans of the middle generation may be passed over.

Intentional strategic planning and clear communication among all generations as to what the expectations are for the working lifespan and when the baton should/will pass can mitigate this new risk.

Traditional risks to business ownership and the economic sustainability of the family enterprise include the death or the divorce of a shareholder when proper planning is not put in place.

The new risk is the evolution of laws governing how assets are allocated in a divorce. In some states, gifted and inherited assets are divisible in a divorce. This does not just include what the about-to-be divorcing family member owns when married; it also includes the expectancy of what that divorcing family member will receive in the future.

Those expectancies are taken into account when determining the allocation of assets between the couple about to be divorced.

A significant side effect to this is how a hostile soon-to-be ex and their attorney will value the family business assets and put that valuation into the public realm of divorce court. The goal of that hostile divorcing member is to value that business high. That valuation may do serious damage to the estate plan of the older generation.

There is also an increased risk for the allocation of alimony. Many family businesses have phantom income that is earned during the course of the marriage that shows up on the tax return and is plowed back into the family business. At issue is how that phantom income should be treated for alimony purposes.

If it was earned during the marriage, is it marital income taken into account for alimony and child support purposes even though not actually received?

When thinking about these risks, it is important to remember that the law and the court in the jurisdiction of the divorcing spouse that will control these decisions. These risks can be mitigated by a well negotiated pre-nuptial agreement or post-nuptial agreement.

Wealth Management

Traditional risks related to a family’s wealth (including financial, intellectual and social assets) include the illness or death of the key family stakeholder, economic downturn and changes in the regulatory or legal environment.

The dissipation of wealth sometimes triggers new risks. With each ensuing generation, wealth is splintered. Besides that, new risks also come from the lack of creation of new wealth during turbulent economic times, the increased complexity of legal and tax matters and the increased complexity of wealth management choices.

These risks can be mitigated when the family coordinates its advisers and monitors the integration of all professional services.

The risks are further mitigated when the family embraces and encourages financial education and financial literacy across the generations. Mentoring, shadowing, exposure to the concepts and resources along the generation continuums reduces unintended consequences.

Risk taking is an essential part of getting ahead. Be sure and invest in yourself and understand and evaluate your risks before you take them.


Patricia Annino
is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Women’s Leadership Role in the Family Business

women in business, family business word cloud image I have been reflecting on the rising role of women in leadership in family businesses and what that means. Based on my more than three decades of working with family businesses I have observed that the leadership style of women is quite different than that of men. These are personal observations. Psychoanalyst Jean Baker Miller, the author of Toward a New Psychology of Women, and first director of the Stone Center at Wellesley College, developed the “Relational-Cultural Theory” with her colleagues. Their work suggests that all growth occurs in connection, that all people yearn for connection, and that growth-fostering relationships are created through mutual empathy and empowerment.

The other side of this is disconnection – when the relationship connections no longer work or have become uncomfortable. When this happens, if the less powerful person is able to express her feelings and the other person is able to respond empathetically, disconnection can actually lead to a strengthened relationship and a strengthened sense of relational competence. If, however, the injured or less powerful person is unable to express her feelings or receives a response of indifference, she will begin to keep aspects of herself out of the relationship in order to maintain the relationship.

This very complicated analysis is at the heart of the difference between men and women in the work force, and in my experience working with in the family business too. Because so much of what a woman values is the connection and the relationship with others, when that is not reciprocated or encouraged, it can impede a woman’s ability to succeed.

For the most part men, on the other hand, don’t have that problem. They measure their success on their individual ability to get ahead and are not as bogged down by how they are judged in relationships with others. Generally, they are also not afraid of ruffling the feathers of those they work with to achieve success.  The fear of controversy can impede women from attaining higher levels of success because women do not instinctively understand that ruffling feathers and creating controversy does not mean that the relationship will end; in fact, it can mean that working through that will improve the relationship and lead to greater success for all. Women are afraid to risk the relationship for personal reward.

This fundamental difference in the way that men and women approach success in business is amplified when family is involved. In a provocative example, I asked three women in family business leadership positions if they competed for their position. In all three instances the immediate reaction was no. When I asked follow-up questions, “Didn’t your brother want the job too?” “Did someone just say now you are the President?”  All three women changed their answer to “I guess I did compete but I really don’t think of it that way”.

For many women today overtly acknowledging competition is just not done. In the family business, all of this is amplified.  In addition to concerns about peer approval and connection there is still the Thanksgiving dinner table and what the rest of the family will think about their leadership of the family business and how they got there. To me, this means that as women leadership in family business will continue to increase, what it means to the woman, the family business and the family itself will continue to evolve.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Goals of a Strong Family Bonded to a Strong Family Business

A third generation family business I have worked with for many years employs all family members and all in-laws whofamily business choose to be employed. Each has a defined job with a job description and is paid according to the responsibilities that member undertakes – not according to how they are placed in the family system. All family and non family members are given performance reviews and their advancement within the organization is merit based.

The legacy of this family is entrepreneurism and safety net, with the additional twist of merit. Because this has been thrashed out, anyone wanting to work in the business has to perform. One son decided not to work in the business and started his own enterprise. He wanted total control of his destiny. That was his choice and it is well respected by all family members.

The goal that the family working together shares is to build a strong business and a family unit that is economically entwined. The underlying premise is that they are stronger together than apart. The CFO is a son-in-law who is as valuable to the family and to the business as any of the sons. This family includes in-laws in its core definition and there has not been a divorce at the second generation. I am sure that the holiday dinner tables focus on business as that is the lifeblood of the family. However, anyone entering the family must decide how comfortable he or she would be in that immersion. And after observing families for more than 30 years it is now clear to me that anyone who is entering a family where the key focus is business must accept that it is what binds the family together, is a fundamental part of all family discussions, and that will not change.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Managing Estate Goals in The Family Business

12-9-14_managing_estate_goalsIn life there will be major goals, and supporting goals. Major goals should be set in the areas of business (including career, family business), finance (including family wealth), education (including what it means to the family and how it will be paid for), family (marriage, children, extended family), creativity (artistic, visionary interests), physical care (health and exercise), public service (issues of importance), faith (religious services, education and participation), and community (whether the community is local such as the town or city, or virtual through other connections).

These goals all connect with each other and when built together, create a sustainable family system grounded in the “true north values” – the course the family wants to go, as well as its ultimate destination and arrival time.

The goals should align with the fundamental values. For example, if the fundamental family values are entrepreneurism and a sense of family safety and if a major goal is to establish a profitable family business in the local community that will employ and support this generation and following generations, then each of the areas referenced above should be explored as part of the goal-setting process.

Goals will change as life and generations change. In some ways legacy goal setting (at the Meta level) is akin to Maslow’s hierarchy of needs. However, at the foundational base are the true north values that each family has. The goals and objectives build from those values and plot the course for the future shaping of the legacy.

These goals will include financial safety and survival, and then when congruent with the true north values will lead to sustainability and perhaps affluence. Financial security or affluence may lead to a greater desire to take care of the community and world at large. Of course, for most families this is not linear; it is just that the emphasis shines on different phases at differing points. Many families know what their true north is, work hard, have faith, and give back to the community and world at large. It is just that the amount of emphasis placed on each sector changes as the need the sector faces changes.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Including Fundamental Values in Estate Planning

sailboat image, fundamental valuesAlthough every family has these fundamental values, not every family is aware of what they are. Sometimes they are assumed and lie dormant until there is a sudden event that shocks the system, forcing the family to address its values and legacy. The shock may be negative – a divorce, a huge financial loss, a physical tragedy or the death of a key family member. The shock may be positive – the sale of a family business leading to significant liquidity, winning the lottery, marriage, an inheritance.

It would, of course, be much better to think about your family legacy before a shock happens. Take the time to focus on what your family stands for, what you would like to transmit to subsequent generations and how you would like your family to partner with the larger community. Intentional legacy planning creates a stronger family unit. It is easier for those entering the family to understand what the values are if the family itself has focused on what the family stands for and begun a plan to implement it.

When learning to sail, a novice starts out in calm water in a boat that cannot overturn. As the skills advance and as the sailor understands the interaction of the compass, the team on board, the boat, the sails, the wind, the weather and the water, the sailor will advance – from a pond to a lake to an ocean and, if very adventuresome, to a trans- Atlantic cruise. As the journey becomes more complicated, so will the team on board, the boat, and the sails. The wind, water and weather will always change, but the compass will always point to true north.

I remember one of the first times I sailed on Cape Cod. I was a teenager and had taken sailing lessons at Stone Horse Yacht Club in a small sailboat known as a Waterbug. It could not tip over, and in the inlet I had enough confidence in my expertise to convince my younger sister that it was safe to crew on my maiden voyage. We never got out of the canal. The cross winds were quite a bit harder than sailing on smooth water in the inlet. There was a restaurant, Thompson’s Clam Bar, on the side of the canal. After watching me turn the boat around in circles and go nowhere for more than an hour a man having lunch went down to his motor boat and towed us out to the open ocean. My sister made us stay out there for 3 hours until she was sure that everyone who had been having lunch at Thompson’s and witnessed my lack of prowess had gone home. By dusk we made it in safely.

Learning to sail is an acquired skill. It takes attention, diligence and practice in different waters. To be very good you must sail through squalls, and you must make plenty of mistakes and then right your course. This is, of course, true in life too. The compass will point to north but getting there requires attention, discipline and practice. If you tried to sail the open ocean without a compass you would be flirting with disaster. If you try to lead your family without a clear understanding and focus of what your fundamental values are, you will be flirting with disaster.

The family of Christopher Reeve is an inspirational example of a family with fundamental values of integrity, generosity, strength and commitment to the community at large include. After his 1995 paralysis from a horseback riding accident, Reeve and his wife formed The Christopher and Dana Reeve Foundation, which has contributed more than $48 million to spinal cord research and nearly $15million to quality of life grants.

The Reeves had built in instincts to command a powerful legacy. Christopher Reeve’s father was the poet and scholar, F.D. Reeve. His great grandfather was the first national commander of the American Legion. Christopher was well educated, having attended Cornell and Julliard before beginning his acting career. Ironically, his acting career led him to the role of the superhero – “Superman”- the symbol of strength and vitality. Yet it was his life-changing injury – the shock to an otherwise “charmed” life – that focused his family on its fundamental values and focused the legacy on medical research and philanthropy.

Clearly one of the components of this family’s value was to tackle hard problems and make a significant difference. When faced with such a horrendous shock to the system, Christopher and Dana Reeve did not engage in pity; they looked outward and harnessed their strength to focus on what they could do to find a cure – not only for Christopher, but for all who had suffered spinal cord injuries.

The Reeves used their foundational beliefs and the gifts they had been given and the contacts they had made along the way to raise the awareness of spinal cord injury and harness funds to promote scientific research. They lobbied for increased governmental funding and, notwithstanding tremendous physical adversity, they went on the road to promote their good work. Another shock happened when Dana Reeve (who was also an actress), who had taken over Christopher’s work and foundation after his death at age 52 of a heart attack, was diagnosed with lung cancer and died at the young age of 44. Their children have banded together and moved the legacy forward. Christopher’s son and Dana Reeve’s stepson, Matthew Reeve is very active in the foundation and is also an independent movie producer and director, carrying on the artistic side of the legacy.

The hard working family of Ralph Lauren has instilled the values of hard work, entrepreneurism and striving for success in its next generation. Ralph Lauren was born in the Bronx, the son of Jewish immigrants. His father was a house painter. From an early age he wanted to work hard and achieve business success. Under his picture in the 1957 DeWitt Clinton High School year book is the statement: “wants to be a millionaire”. He showed a flair for fashion and business in his early years in the fashion industry, and that led to The Ralph Lauren Corporation which today boasts $6.9 billion in sales.

His children are carrying these values and legacy forward. His daughter, Dylan Lauren, founded a candy empire. His son, David serves as executive vice president of global advertising, marketing and communications for The Ralph Lauren Corporation.

The Laurens have taken this legacy of hard work and entrepreneurial spirit into their philanthropy. The Polo Ralph Lauren Foundation supports initiatives in cancer care, education and service in underserved communities. The corporation partnered with Memorial Sloan-Kettering Cancer Center in New York City to create the Ralph Lauren Center for Cancer Care and Prevention, the only outpatient center of its kind in Harlem. In addition the corporation and its foundation fund: the Pink Pony Campaign (providing proceeds to fight cancer), the American Heroes Fund (to provide scholarships to the children of 9/11 victims), the Polo Fashion School (encouraging educational opportunity through volunteerism and grants), the Ralph Lauren Volunteers (encouraging employee participation in non profit community-based programs), and The Star Spangled Banner (providing the funding for the restoration and preservation of the flag that inspired the national anthem). Dylan Lauren, with her candy empire, partners with charitable organizations and has a special emphasis on charities that support animals.

Public service is the dynastic Kennedy family’s legacy. Their commitment began in this country’s memory with the patriarch and matriarch, Joseph P. Kennedy and Rose Kennedy who combined their fundamental values of hard work, faith, commitment to family and commitment to the world at large. In spite of enduring and very public tragedies this family has continued to impact the fabric of our country through its commitment to public service and political leadership. The Kennedy family legacy began with very focused, disciplined parents who knew early on what values they wanted to impart and passed them on to subsequent generations who worked through turbulent family and world times to keep the legacy on course.

Not all families have the dynastic power of these, but every family can think about what matters most at its core – what are the values that comprise its “true north” and have been passed down in its DNA and will be passed on to future generations.

Even when the instinct is there, success in transmitting these values to subsequent generations requires intentional strategic planning and begins with an understanding of what the values are that are at the family’s core.

It is interesting to note that the Reeve, Lauren and Kennedy families, along with many of the flourishing families I have dealt with as part of my practice, hold the underlying core value that family is important and that a strong family is essential. A strong family system with shared beliefs will absorb the shocks from the external world and adapt and become more resilient and sustainable each time a new shock (positive or negative) occurs.

Do you have a clear, articulated understanding of what your family’s predominant values are? See “Across Generations: A Five-Step Guide for Creating an Expression of Donor Intent” by Susan Turnbull and Amy Zell Ellsworth for a wonderful discussion of family values. Values they include are highlighted below.

Examples include:

  1. Taking care of, supporting and loving each other (a sense of safety)?
  2. Virtue: Knowing right from wrong?
  3. Faith: Commitment to God?
  4. Patriotism: Commitment to country?
  5. Commitment to cultural heritage?
  6. Military service?
  7. Commitment to philanthropy?
  8. Service to community?
  9. Hard work?
  10. The importance of education?
  11. Creativity?
  12. Individualism?
  13. Public service?
  14. Entrepreneurship?
  15. Perseverance?
  16. Gratitude?
  17. Merit?
  18. Responsibility?
  19. Resourcefulness?
  20. Trust?
  21. Forgiveness?
  22. Generosity?
  23. Thrift?
  24. Wisdom
  25. Communication?
  26. Independence?
  27. Leadership?
  28. Loyalty?
  29. Respect?

Including your fundamental values when establishing your estate plan is vital to creating an estate that will pass the test of time.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Stay The Course: Establish Your Family’s Fundamental Values!

“It’s humbling and enthralling to know your legacy when you’re alive”. Laura SchlesingerStay the Course sign, family unit

 “Family is not an important thing. It is everything.” Michael J. Fox

Every family (whether its members know it or not) has a “true north” – guiding values that are part of the DNA that holds the family together and makes its legacy what it is. These are the values that have been embedded and blended through generations. In every family there are two sets – the values that matter when the family interacts with each other and the values that matter when interacting with others. Sometimes these overlap, and sometimes they do not.

Although every family has these fundamental values, not every family is aware of what they are. Sometimes they are assumed and lie dormant until there is a sudden event that shocks the system, forcing the family to address its values and legacy. The shock may be negative – a divorce, a huge financial loss, a physical tragedy or the death of a key family member. The shock may be positive – the sale of a family business leading to significant liquidity, winning the lottery, marriage, an inheritance.

It would, of course, be much better to think about your family legacy before a shock happens. Take the time to focus on what your family stands for, what you would like to transmit to subsequent generations and how you would like your family to partner with the larger community. Intentional legacy planning creates a stronger family unit. It is easier for those entering the family to understand what the values are if the family itself has focused on what the family stands for and begun a plan to implement it.

When learning to sail, a novice starts out in calm water in a boat that cannot overturn. As the skills advance and as the sailor understands the interaction of the compass, the team on board, the boat, the sails, the wind, the weather and the water, the sailor will advance – from a pond to a lake to an ocean and, if very adventuresome, to a trans- Atlantic cruise. As the journey becomes more complicated, so will the team on board, the boat, and the sails. The wind, water and weather will always change, but the compass will always point to true north.

I remember one of the first times I sailed on Cape Cod. I was a teenager and had taken sailing lessons at Stone Horse Yacht Club in a small sailboat known as a Waterbug. It could not tip over, and in the inlet I had enough confidence in my expertise to convince my younger sister that it was safe to crew on my maiden voyage. We never got out of the canal. The cross winds were quite a bit harder than sailing on smooth water in the inlet. There was a restaurant, Thompson’s Clam Bar, on the side of the canal. After watching me turn the boat around in circles and go nowhere for more than an hour a man having lunch went down to his motor boat and towed us out to the open ocean. My sister made us stay out there for 3 hours until she was sure that everyone who had been having lunch at Thompson’s and witnessed my lack of prowess had gone home. By dusk we made it in safely.

Learning to sail is an acquired skill. It takes attention, diligence and practice in different waters. To be very good you must sail through squalls, and you must make plenty of mistakes and then right your course. This is, of course, true in life too. The compass will point to north but getting there requires attention, discipline and practice. If you tried to sail the open ocean without a compass you would be flirting with disaster. If you try to lead your family without a clear understanding and focus of what your fundamental values are, you will be flirting with disaster.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Book Review: ‘Abusing Donor Intent’ by Doug White

The Robertson family gave millions to ensure more Princeton grads would work in government. When they didn’t, the Robertsons sued.

By Leslie Lenkowsky

In 1961, in a burst of John F. Kennedy-inspired idealism, investor Charles S. Robertson and his wife, Marie, an heiress to the A&P supermarket fortune, gave $35 million to Princeton University, one of the largest donations to a university up to that time. Its purpose was to help Princeton students “prepare themselves for careers in government service,” particularly positions in the federal government dealing with international affairs.

Four decades later, following years of growing acrimony, the Robertsons’ son, William, and two close associates sued Princeton to get back the money, which had grown to some $600 million. They claimed that the university had not been using the funds as Charles and Marie Robertson intended, a violation of the legal and ethical responsibilities that recipient institutions have toward their donors.

In “Abusing Donor Intent,” Doug White, who teaches fundraising management at Columbia University, gives a detailed, though sometimes overwrought, account of a case that attracted national attention and highlighted the frustrations that donors feel when they see their money being used for purposes they never intended. After six years, the suit resulted in a settlement that left Princeton with much of the money but gave a share of it to a new foundation controlled by the Robertson family. The whole episode shows the potential dangers of philanthropic generosity, for donors and recipients alike.

From the start, Charles Robertson doubted Princeton’s capacity to do what he and his wife wanted. “In 1960,” Mr. White writes, “Robertson didn’t think much of the graduate program at the Woodrow Wilson School,” which prepares students for public-service careers. Based on meetings in Washington, he had concluded that the school’s director was not “qualified,” the school itself had a weak reputation and its advisory council of old government hands had little influence.

The Robertsons went ahead with their gift anyway, assuming that the Wilson School would improve if it had the funds. Princeton seems to have agreed. With the Robertson money and its investment returns, the school began spending on faculty, research centers and a new building that it thought would enhance the Wilson School’s quality and reputation. By some measures, it succeeded. U.S. News & World Report, for example, now ranks Princeton’s public-affairs programs in the top five among American graduate schools.

 

abusing donor intent book image,charles robertson, donor intentAbusing Donor Intent

By Doug White
(Paragon House, 316 pages, $19.95)

Where Princeton did not succeed was in sending more of its students to Washington. By 1970, Charles Robertson was complaining to the Wilson School’s dean that too many of its graduates were going to work in “academia, private business, or the law,” and he urged changes, such as admitting more applicants who wanted government jobs or teaching more public administration. Shortly after, William became the principal member of the family on the Princeton-controlled board that oversaw the Robertson gift and took up, with increasing force, his father’s criticisms.

Princeton knew it had a problem with the Robertsons. In 1980, the college’s president, William Bowen, acknowledged that the members of the family “hold tightly to the original promises” and that “even to raise questions with them would be counterproductive in the extreme.” Nonetheless, Princeton refused to change course, with Mr. Bowen insisting that the Robertson funds should be spent in ways that “will benefit other parts of the University as well as the School itself,” which meant underwriting public-service programs but also a range of needs beyond the Robertsons’ core mission, including supporting university overhead and faculty outside the Wilson School. Such spending precipitated the 2001 lawsuit.

In this dispute, Mr. White sees an unambiguous violation of donor intent. Princeton, he believes, should have carried out the family’s wishes, requested modifications or returned the money. Instead, as he argues and court records bear out, income from the Robertson gift was spent in ways that did little to put more Woodrow Wilson School graduates in the federal government. Forensic accountants had trouble tracing the uses of the money through Princeton’s labyrinthine bureaucracy.

Princeton maintained that, rather than violating donor intent, it was honoring it: The university was using the gift to recruit top-flight scholars, thereby enhancing the Wilson School’s program. And the school claimed that, once the gift had been made, it had the authority to determine how best to use the funds. The failure of more students to go to Washington, it also argued, was caused not by its own lack of effort but by the declining appeal of federal government jobs and the increased attractiveness of other forms of public service, such as working for international nonprofit groups.

Although Mr. White believes that the Robertsons made the better case, the settlement, overseen by a New Jersey court, found merit on both sides. And indeed, it is hard to see the Robertsons’ experience as an emblem of flagrant donor abuse on a par with, say, the Bass grant to Yale University in the 1990s, when Lee Bass, hoping to foster the study of Western civilization, eventually took back his money, frustrated by Yale’s unwillingness to set up the courses or programs he had in mind. Princeton’s fault lay more in a gradual diversion of the earnings of Robertson gift to a variety of uses within the university and its failure to meet the family’s specific goal of increasing the number of graduates entering the federal government. The family’s frustration was understandable in any case, and surely Princeton at times showed an arrogance or lack of transparency that no recipient of philanthropy should emulate.

Since 2011, the new Robertson Foundation for Government has provided fellowships to 80 graduate students at five public-policy schools. This more modest and direct approach may stand a better chance of achieving the family’s goals than entrusting philanthropic resources to an Ivy League institution with its own purposes and needs.

Mr. Lenkowsky is professor of philanthropic studies and public affairs at Indiana University.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

The Congruency Audit Explained!

values plate image, family leader,Protecting your family’s legacy is much more challenging than it once was. The family leader must learn how to perform a congruency audit for your family. This may reveal technical issues, communication issues, fiduciary issues, tax issues, liquidity issues or a lack of coordination of the pieces of the puzzle.

It starts with an understanding of the fundamental values of the family – the true north. From that all else flows and the legacy builds. If the family does not have a clear idea of its values –what is in its DNA – then that is the first place that the family leader must start.

All else builds from that. Once the foundation is set, the goals and objectives must be charted. Once the goals and objectives are charted, then the enabling structures are crafted with the assistance of the team of advisors.

This is not the traditional way of thinking about legacy. Traditionally, the family leader goes to advisors one at a time to solve specific issues and does not touch base with the fundamental values. A family may go to the estate planning lawyer for wills and trusts, for example, and mainly focus on taxation… or go to an investment advisor and focus on conservative investments with minimal risk, failing to focus on the fact that part of the family’s net worth is in generational trusts, not for immediate use, and should be invested for growth.

A core issue that surfaces in almost every congruency audit is the lack of enough education about what the plan is, what it means and what its consequences are. In fact, all planning should be congruent.

  • Are you and your family prepared for what lies ahead?
  • Do you know what the core values of your family are?
  • Do new members marrying into the family know what the core values are?
  • Do they accept those core values?
  • Have these values been articulated?
  • Do all other family members also know what your core values are?
  • If there are issues that are affecting your core values, are you prepared to deal with them?
  • Have you set your goals?
  • Do you have up–to-date legal documents that enable your goals?
  • Do you have the right financial structure to facilitate those goals?
  • Do you have your team of advisors?
  • Is your plan congruent so that it relates back to your true north?
  • Have you established a system so that as life changes, your legacy is sustainable?
  • Let’s broaden some of those questions:

If you have minor children, do the persons named as guardians have your values? Do they understand what you would like your children to learn in life (not just for the time frame they are living with the guardians, but as part of the bigger legacy)?

Have you provided the guardians with sufficient financial means to achieve the goals? Have you thought about the financial condition of the guardians? Will your children have more wealth than they have? If you intend that your children attend private school, should your estate also pay for their children to attend private school? Who is paying for family vacations? Is it your intent the now blended family continue on as one unit? How should any difference in wealth be addressed? Have you established the proper legal documents so that the guardians can effectively carry out their role?

If you own a business with partners or shareholders, what do your values say that about the business? Is it an investment; is it part of the family DNA to be put in the hands of the next generation? Is it up to the next generation to make the best decisions? How have you coordinated that with your goals and objectives? Are your estate taxes covered? Do you have key man insurance? Buyout insurance? Are your legal documents (trusts, shareholder agreements) current and up to date? Do you have a coordinated team of advisors? Has this plan been recently reviewed? Is your plan congruent with your values?

If your son or daughter is about to marry, what is the family feeling about your future in-law? Is it assumed that person is part of the family? Is there a dividing line between being part of the family and having access to the business or the money? Is there a dividing line between being part of the family business and money? Is the rule that an in-law benefits from the family as long as he/she is in it? Is it that the in-law will always be the mother/father of my grandchildren and therefore is part of the family? What are your goals and objectives as your family expands? Do you require prenuptial agreements to protect your family assets? Do you include in-laws as part of the estate planning process? Are your financial and legal documents up to date and congruent with the goals and objectives? Did you discuss this with your team of advisors, or did you sign standard documents?

If you are older and concerned about your ability to care for yourself and your finances, have you selected (individuals or institutions) to do so? Do they understand your values? Do they have the ability to carry out your goals and objectives (to stay at home, or live in nursing home) and pay for care?

Have you arranged for the financial ability to implement that lifestyle and establish the proper legal documents, so that the persons in charge of your physical, custodial and medical care and the persons or institutions in charge of paying for the care are on the same page, and there is no conflict between those in charge of the purse strings and those in charge of the physical care? To what extent should family members be involved? As care givers? As overseers? Have you expressed your intent on these matters to those who will be making the decisions? Are you certain they are willing to take on these responsibilities?

None of these planning decisions should be made in a vacuum. When congruency does not occur, the foundation of the entire system can be disrupted. You will always need a team of expert advisors to assist you, but you must be the Captain, always aware of the true north of the compass to keep the plan on course.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Who Will be the Captain of Your Estate Planning Ship?

Excerpt from Patricia’s new book: It’s More Than Money: Protect Your Legacy

“The thinking that created today’s problems is not the thinking that can solve those problems.” ~ Albert Einstein

9-14-2014 It's More Than Money Book CoverYour life and the legacy of your family is a movie (with sequels), not a snapshot. Why then do so many of us view our family values, financial decisions and legal documents as stand alone decisions that do not correlate with each other, are not compared to each other and are not integrated?

In my thirty years of practicing law and working with many families and family businesses in estate planning I have come to the conclusion that the most important role the head of the family can play is “Captain of the ship”. Effective planning is a bit like sailing.

When a captain sets off for a long sail, he needs to understand where he is going, how he is getting there, and what may occur along the way. Nature will always intercede. Weather and winds will change; storm waters and other hazards may lie ahead. But what is important is to set the plan and then stay flexible and keep checking the actual course against the planned course, and while doing that, to keep in mind the position of the compass set to “true north” – a fixed point centered on the values that are most important to you.

The elements of sailing are the foundation (an internal compass set to true north), goals and objectives (the mapped course) and the enabling structure (boat and sails). It is the responsibility of the Captain of the ship to be aware of all external forces (ocean, weather and wind) while sailing. The one element that is fixed is the direction of the compass – set to true north. All other elements must be congruent to true north and to each other. That gives the journey the best shot at success and sustainability.

For a family, sustainable planning includes the same elements – the foundational elements (values e.g. family first), the goals and objectives (how those values will be translated in life – family business, family investments, philanthropy, family activities) and the enabling structure (legal estate and business planning documents, financial investments and the team of advisors).

It is the responsibility of the family leader (the Captain) to be aware of all of these elements in the context of all external forces (changes in family members, changes in advisors, world economics, and business risks) while navigating life and legacy. These elements must all be congruent to the foundational family values and to each other. That gives the family the best shot at sustainability and legacy.

For many families the elements are done independently – with separate advisors who do not know each other, never speak and do not have direct knowledge of what the others are doing. And for many families at least one of these elements may not be done at all or may be quite outdated.

For a plan and its legacy to be sustainable, the elements must be integrated and congruent. The legal plan should align with the family goals and match the legal and financial documents. If your family is connected by a family business, real estate or philanthropic endeavor, is the estate plan for the family system in agreement with its financial plan and the family objectives? A congruent plan increases the probability of sustaining what that family has worked so hard to put in place and builds its legacy.

For most families the answer to this question is “no”, but not for a lack of effort. It is because a plan is built up over many years by many independent professionals – the estate planning attorney, the accountant, the financial planner, the banker, the life insurance professional, and the philanthropic advisor – each focused on a different part of the system. Even though their work may be independently excellent, most of the time they are responding to a need that was expressed in a certain time frame – minimize estate taxes, determine who should control the vote of the company stock, equalize the assets, protect assets from a child or sibling divorce, etc. Even if the “team” communicates well at these independent junctures, it is unlikely that communication is deep or continuous.
Professionals focus on what they know. Every well-meaning and talented advisor goes back to his/her specialty to answer a need or solve a problem. Some families have a family office or trusted advisor they are fortunate to work closely with.

Experience has shown that this improves communication but does not provide the unique perspective that can be viewed when zooming down on the system from 30,000 feet above. Perspective is important. It is only when the system is independently reviewed from on high – from that 30,000 foot level – that black holes in coverage – those areas that no family member or advisor thought of because each was focused on his own specialty – become readily visible.

No advisor can do that for you. It is your responsibility, as the family leader, to make sure all the elements of your plan are congruent, and the best way to for you to do so is to view the planning as Captain of the ship from that “on high” perspective.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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