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Table of Contents

MULTI GENERATION WEALTH AND FAMILY MANAGEMENT 2

SERVICE CONTEXT 2SERVICE SCOPE 3ASSET OWNERSHIP & CONTROL 3LIFE RISK MANAGEMENT 3TAXATION PLANNING 3RETIREMENT PLANNING 3CARE PLANNING 3CONSTRAINT ON ENGAGEMENT 4

INVESTIGATE AND REPORT PHASE 4

COLLECTING QUANTITATIVE AND QUALITATIVE DATA ABOUT THE CLIENT’S AFFAIRS 4ANALYSIS 5SYNTHESIS – SETTING OUT THE MULTI-GENERATION STRATEGY 8ORGANIZING YOUR INPUTS TO THE SYNTHESIS PHASE 9REPORT 12

IMPLEMENT AND SUPPORT PHASE 12

EVALUATE, CLIENT DECISION, IMPLEMENTATION AND PERIODIC REVIEW 12

SOME ISSUES IN IMPLEMENTING THE PLAN 12

LEAD ESTATE ADVISER 12LAWYER 12FINANCIAL ADVISER 13ACCOUNTANT AND TAX ADVISER 13

ADVISER SKILL CHECK FOR THIS SERVICE 14

WHAT COMPETENCIES DO PLANNERS NEED TO PERFORM THIS WORK? 14COLLECTION 14ANALYSIS 14SYNTHESIS 14WHAT PROCESS IS TO BE FOLLOWED IN THE OPERATION OF THIS ENGAGEMENT? 14WHAT PRACTICES ARE TO BE FOLLOWED IN THE INITIAL INVESTIGATION OF THE CLIENT’S REQUIREMENTS? 15FOUNDATION KNOWLEDGE 15WHAT IS YOUR ESTATE? 15WHAT IS A LEGAL ISSUE? 15

REFERENCES AND FURTHER READING 16

FAMILY FIRM INSTITUTE 16STEP 16FAMILY OFFICE CONGRESS 2008 BLOG (FOC 2008) 16FAMILY OFFICE EXCHANGE (FOX) 16CARNEGIE MANAGEMENT 16FAMILY BUSINESS AUSTRALIA 16

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Multi Generation Wealth and Family ManagementA strategy for clients focussed on wealth retention to facilitate transfer of some or all that wealth to subsequent generations.

At the start, the adviser must agree with their client what is to be dominant theme in their strategy review:

1. Family fist2. Business first3. Wealth / Money/ Finances first4. Social and Community contribution first

The agreement about the dominant theme or themes of the initial estate strategy review will inevitably colour the approach of the adviser to the engagement and the skills that are needed for its completion.

Advisers need to be careful when establishing their initial Scope of engagement, all necessary service scope exclusions are documented.

Whilst some clients are only focussed on the administration of their affairs during their lives, increasingly, clients are seeking to preserve accumulated capital for the benefit of multiple generations.

This is not about “ruling from the grave” but rather, groups of people (families) deciding that it is in their interests to manage a pool of capital as a “collective wallet” and facilitate the preservation and benefit of all people in the beneficiary group.

A result of this is that beneficiary expectations are shifted from receiving capital amounts or discrete items of property to receiving income streams, management rights and a seat at a governance table of some description.

This paper sets out the information, competencies, practices and activities that need to be brought to a multi-generation estate planning engagement.

Service ContextYou have been engaged by your client to advise them about their estate management and succession.

You have explained to your client that you need to collect both data and information about them and their affairs.

Your clients have as part of your initial discussions made observations such as these:

• “I want my money to last to my grandchildren”

• “I am a business owner and am concerned in this downturn about being sued; how can I protect my capital and provide security for my family?”

• “I am spending my money on my wife and myself, the kids can simply have whatever is left over when we are gone; just break up what’s left evenly between the kids as simply as possible.”

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• “I have spent all my life building up the family business. Times have been good to us. My children are running the business but my wife and I still own all the shares. How do we balance the interest of our children and ourselves? How do we manage our estate for ourselves and our bloodline?”

You advise them that in order to achieve these objectives, they need to manage the ownership and control of their property in a way that will prevent immediate breakup and distribution of their property after they die.

Service ScopeYou identify to the client that you are being asked to assist the client to change the management of their affairs so that they can meet their identified objectives. In being their advisers you are also an agent of change in the client’s life. If the client does not accept these as part of your role then moving from the advisory to implementation phases of the engagement may not occur.

You have discussed with the client, as appropriate, that whilst preserving their estate for the benefit of their successors is a fine objective, they also have to plan for the risks and needs for their own lives. This provides a natural tension between the current generation having sufficient resources to maintain their lifestyle with minimal risk to the depletion of their assets.

You decide with the client which of the following service elements are relevant to the management of their affairs:

Asset Ownership & ControlDetermines impact and limitations on form of asset ownership on estate planning objectives

Determines impact of client family and beneficiary maintenance obligations on estate planning objectives

Determine impact of estate claimant rights on asset ownership and control.

Life Risk ManagementDetermines impact of the client’s life risk management objectives on their estate planning

Taxation PlanningDetermines the impact and limitation of the client’s attitude towards taxation on their estate planning objectives

Retirement PlanningDetermines the impact of the client’s retirement objectives on their estate planning objectives

Care PlanningDetermines the impact of declining health and capacity of the client and their dependents on the cost of their care and maintenance during their lives.

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Constraint on engagement You identify any constraints upon the client’s estate planning objectives and this engagement. Normally these will relate to:

1. Personal and Family Representation and Succession

2. Family Continuity, Governance and Legacy

3. Wealth Preservation, Enhancement and Transfer

4. Business Ownership and Control

5. Financial Security and Compliance

You identify o the client these factors may influence the extent to which their main objectives can be achieved.

Investigate and Report PhaseCollecting quantitative and qualitative data about the client’s affairsSee EP Fact finder sample as guide for kind of investigation needed.

Identify client’s response and priority around these estate management risk areas 1. Personal and Family Representation and Succession





Drilling down on the client’s concerns1. Concerns about wealth preservation often lead to discussions about family continuity, governance and financial security.

2. Concerns about wealth enhancement, business ownership and personal succession often lead to discussions about business succession and whether a business should be retained within a family or a particular generation within a family.

3. Concerns about wealth preservation and personal succession often lead to a discussion about inheritance protection and isolating financial assets and resources from relationship and creditor risk.

These are only a sample of the client objectives and concerns that are motivating clients to ask more from their estate advisors.

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Identify the systems that operate in the affairs of the client and the relationships between these systems.1. Family

2. Business

3. Property

4. Social and Community.

Identify the professional advisers already engaged to the client and their role in the management of the client’s affairs.These advisers may include:

1. Accountants2. Financial Planners3. Trustee companies4. Family Business Advisors5. Business and Personal coaches and mentors6. Tax advisors7. Corporate and business advisors

AnalysisThe planner identifies and considers issues, performs financial analysis as appropriate and assesses the resulting information to be able to develop estate planning strategies for a client. These activities include the following

Considers potential opportunities and constraints to develop strategies

Client and Beneficiary Identity and Advisor role and functionDetermine whether the client and ancilliary parties to the engagement are sufficiently identified.

Resolve any conflict of interest between multiple family elements involved in the planning engagement.

Include adviser limits to engagement and representation of client in engagement letter to client

Acknowledge role, function and responsibility of other concurrently engaged advisers with whom planner will be working in the current engagement.

Client territorial connectionsDetermine the impact of the client’s territorial connections on their estate planning objectives.

Family structure and membersDetermine the impact of estate claimant, relationship property and beneficiary vulnerability on the estate planning objectives of the client.

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Financial ManagementDetermine client limitations on which they will appoint as their representatives and the expected role of representatives in the client’s financial management function.

Asset Ownership & ControlDetermines impact and limitations on form of asset ownership on estate planning objectives

Determines impact of client family and beneficiary maintenance obligations on estate planning objectives

Determine impact of estate claimant rights on asset ownership and control.

Risk ManagementDetermines impact of the client’s risk management objectives on their estate planning

Taxation PlanningDetermines the impact and limitation of the client’s attitude towards taxation on their estate planning objectives

Retirement PlanningDetermines the impact of the client’s retirement objectives on their estate planning objectives

Care PlanningDetermines the impact of declining health and capacity of the client and their dependents on the cost of their care and maintenance during their lives.

Estate PlanningIdentifies any constraints upon the client’s estate planning objectives. Normally these will relate to:

1. Personal and Family Representation and Succession





Assesses information to develop strategies

Client engagement scope and limitations on reportAssess appropriate limits on adviser function, responsibility and role in the engagement as appropriate to the agreed terms of engagement.

Assess appropriate scoping of role, communication process and reporting accountability with the client and other concurrently engaged advisers in the engagement.

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Client IdentityAssess whether the client and all other parties are adequately identified

Assess whether the client and all other parties have the capacity to carry out their role in the estate plan.

Client territorial connectionsAssess the impact of the nature and extent of client connections with states, territories and countries.

Family structure and membersAssess the client’s exposure to estate claimant and other 3rd party claimant risks

Assess the requirement of family members for special treatment (e.g. due to beneficiary health or vulnerability)

Financial ManagementAssess whether there is adequate representation of the client in the estate’s financial and personal management

Assess whether there are adequate controls in place to align the ownership and operation of non-testamentary estate structures with the estate planning, administration and succession objectives of the client.

Asset Ownership & ControlAssess the estate planning consequences of actual state of asset ownership and control within estate.

Assess whether client family and beneficiary maintenance obligations are met through the client’s estate planning objectives.

Assess the impact of estate claimant rights on the estate’s asset ownership and control.

Estate structuring choices broadly fall into the following areas:

1. Transfer property to structures such as companies or trusts in order to take assets outside the personal asset pool that would otherwise be governed by a person’s will, or

2. Do nothing during your life, keep all assets in personal ownership during life and distribute the assets on your death to your beneficiaries, or

3. Establish a form of collective property ownership under your will that preserves on death the property you own for the benefit of the beneficiaries you nominate on the terms you establish for the trust.

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It is the role of the estate advisor to assist their clients to navigate these choices. Care must always be taken to ensure that a client is fully informed about the consequences of their decision making and that they are considering the big picture. Focussing on one narrow point, such as tax, can lead to disastrous consequences.

Risk ManagementAssess the impact of the client’s risk management objectives on their estate planning objectives.

Taxation PlanningAssess the impact of client’s attitude towards taxation and their current unrealised taxation costs on the client’s estate planning objectives.

Retirement PlanningAssess the impact of the client’s retirement objectives on their estate planning objectives.

Assess the impact of the client’s longevity on their retirement planning objectives.

Estate PlanningAssess the impact of the information analysed on candidate estate planning strategies.

Assess the impact of family dynamics and business relationships and personal relationships on the client’s estate planning objectives.

Project net worth at retirement and death

Project net liabilities and net estate wealth at death

Assess the needs of beneficiaries and estate claimants.

Assess the liquidity and solvency of the estate at death

Consider impact of taxation and territorial connections on the client’s wealth at death and tax rollovers available

Synthesis – Setting out the multi-generation strategyIn moving from analysis of data and information to the synthesis of a solution that meet the client’s objectives, the planner is concerned with:

Prioritising recommendations from the estate planning components to optimize the client’s situation and meet their estate planning objectives

Consolidating the recommendations and action steps into an estate plan

Determining recommendations for an appropriate cycle of review for the estate plan and its implementation.

The planner as a result synthesizes information and develops and evaluates strategies that are combined to create an estate plan that includes:

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1. appropriate asset owning structures or arrangements that keep the assets in consistent ownership and management for the expected life of the wealth recovery strategy,

2. continuation of competent management of the structures or arrangements that can be reasonably expected to endure for the life of the strategy,

3. continuation of appropriate common interest between the beneficial interests of those who are to profit from the operation of this wealth management enterprise. Multi-generation wealth management strategies will only endure where the collective wealth management enterprise delivers greater value to the collective beneficial interests than could be achieved by the individuals alone.

It is in achieving objectives 2 & 3 that clients can be faced with substantial challenges. Whilst clients may wish that their successors manage the family wealth management enterprise themselves, this may not be practical.

Faced with these issues, discussion of objective 2 may also lead to a discussion about family offices and the use of commercial trustee companies. Discussion of objective 3 most often results in a discussion about management succession control on companies and trusts and the use of shareholders agreements, family constitutions and family councils to establish appropriate governance around the collective and common interests of a client and their successors.

Organizing your inputs to the synthesis phaseAchieving this professional function requires that the planner take into account, as relevant to the engagement, the following matters:

Client, beneficiary and other party IdentityDetermine the role function and responsibility of each person in an estate plan.

Client territorial connectionsDetermine the territorial scope and function of an estate plan

Family structure and membersDetermine estate planning priorities between the client and their successors and estate claimants.

Determine the nature and extent of financial and social accountability between the client, family members and other estate claimants and beneficiaries

Determine the practical extent of multi-generation accountability in the estate plan and incorporate strategies in the estate plan to support the operation of the estate plan across generations in a family.

Determine relevant beneficiary and estate claimant needs and implement strategies to respond to those needs in the estate plan.

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Financial & Estate ManagementDetermine client appointments for financial management and personal representation by attorneys, guardians, trustees and general agents & representatives.

Determine the role functions and accountability of the clients’ estate and financial managers to the client’s family and estate beneficiaries.

Determine and recommend funding sources for estate strategies.

Asset Ownership & ControlDetermines estate administration strategies within the estate plan that respond to the actual state of asset ownership and established constraints on that ownership (e.g. assets owned by a trustee but held in part or whole for the client’s benefit).

Risk ManagementDevelop risk management strategies that respond to the identified risks and risk tolerances of the client.

Determines client willingness to manage identified risks. That include

Business Ownership and Control

Equity IssuesFamily Control

Family Dynamics in Business

Family Business Leadership

Business GovernanceManagement Issues

Alignment of interests

Business Strategy

Operations IssuesBusiness operations effectiveness and efficiency

Wealth Preservation and EnhancementInvestment goals and objectives

Asset diversification

Manager selection

Investment performance

Ownership exposure for private equity

Private equity distressed situations

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Family Continuity and GovernanceFamily Legacy

Family Governance and decision making

Family Relationships

Family Reputation and Public Image

Philanthropic Legacy

Personal security and privacy

Personal health and wellness including care planning for clients, dependants and their vulnerable beneficiaries.

Personal Ownership responsibilities

Collective ownership responsibilities

Financial Security and ComplianceLegal Exposure

Fiduciary Exposure

Wealth Transfer protection

Physical asset protection

Financial Leverage

Financial Oversight

Financial reporting and Compliance

Family Group Oversight and accountability

Taxation PlanningIncludes appropriate strategies in the estate plan to respond to the taxation liabilities and responsibilities of the client

Develops appropriate tax planning strategies.

Retirement PlanningDetermines appropriate retirement strategies that integrate with the client’s estate planning objectives

Develops appropriate retirement planning strategies.

Care PlanningDetermines appropriate care planning strategies that integrate with the client’s estate planning objectives and respond to the declining health or capacity of clients and their dependants or otherwise vulnerable beneficiaries.

Develops appropriate care planning strategies.

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ReportThis is the activity of delivering the planners’ recommendations to the client for their consideration and comment.

Implement and Support Phase

Evaluate, Client Decision, Implementation and Periodic reviewThis is the activity that delivers the change to the client’s circumstances that they are seeking from this engagement

The detail of this will vary from engagement to engagement

Some issues in implementing the plan

Lead Estate AdviserThis is the professional who has the role of forming the high level estate administration strategy with the client.

The objective of estate planning is to produce a method of administration of a client’s affairs that meet their goals. This inevitably means the planner becoming an agent for change in the life of their client.

The success of achieving a multi-generation wealth management strategy will in large measure depend on the success with which the client’s successors embrace and support the value of the “shared wallet” to their lives and objectives.

Establishing a plan for the development of a family culture that supports the operation of the strategy and the social and relational memory that is required to achieve this result is a key matters to assuring the ongoing success of the strategy.

Where multiple advisers are engaged to the assist the client in the management of their affairs, the lead adviser may also have the role to manage the overall synthesis of adviser recommendations and their presentation to the client. This role may also be retained by the client. It is vital that the precise scope of function of the lead adviser be agreed with the client at commencement of the engagement.

LawyerLegal issues may be found in all dimensions of the client’s affairs.

The professional practice of law is a reserved area of professional practice for licenced legal practitioners. Other professionals must not engage in legal practice without holding a current practicing certificate,

Lawyers will normally be most concerned about:

1. Establishing the extent of real and personal property in a person’s estate.2. Establishing the extent of legal rights 3rd parties may have to claim a

portion of a client’s estate

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3. Establishing the formal legal accountability a client may have to 2nd and 3rd parties.

4. Establishing what extent of property lies outside the jurisdiction of a person’s will

5. Documenting appointments of legal personal representation and estate structure management to meet the intentions and needs of the client.

6. Establishing appropriate legal certainty in the documentation and implementation of the clients’ estate management and succession strategies.

Financial AdviserCare must be taken that only appropriately licensed financial advisers deal with the provision of financial products and services.

Compliance with the Corporations Act 2001 and its regulation of financial advisers is a key compliance burden on financial planners.

For professional advisers who do not hold appropriate financial services licences or representation authorities, it is in their interest to identify the appropriately licenced professional who has responsibility for these functions and who bears the professional responsibility for dealing with these matters with a client.

Issues that will form part of the primary responsibility of financial planners will include:

1. Investment goals and objectives2. Asset diversification3. Manager selection4. Investment performance5. Financial Product Leverage6. Financial Product and Service Oversight7. Financial Product and Service Reporting and Compliance

Accountant and Tax adviserOne or more advisers may perform these roles.

The lawyers’ conclusions about what is in the estate for management and the accountant’s view about how this is reflecting in the accounting, financial and tax affairs of the client may not correlate.

Any lack of correlation between the accounting, legal, tax and financial dimensions of the client’s affairs need to be identified and discussed with the client in the course of a comprehensive estate review.

Consideration needs to be given to whether these areas of function should normally be excluded from an advisors engagement unless specifically included by the client.

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Adviser Skill check for this serviceEstate Planning is a specialist professional occupation. To perform this service at such a level means advisers need not only experience but also foundation knowledge, competencies, practices and skills.

Advisers developing multi-generation wealth management strategies need to have formal education in at least the following matters.

What Competencies do planners need to perform this work?

CollectionThe planner:

1. Collects the quantitative information required to develop an estate plan

2. Collects the qualitative information required to develop an estate plan

AnalysisThe planner:

1. Considers potential opportunities and constraints to develop estate planning strategies

2. Assesses information to develop strategies

SynthesisThe planner develops and evaluates strategies to create an estate plan by:

Prioritising recommendations from the estate planning components to optimize the client’s situation and meet their estate planning objectives

Consolidating the recommendations and action steps into an estate plan

Determining recommendations for an appropriate cycle of review for the estate plan and its implementation.

What process is to be followed in the operation of this engagement?1. Client and advisor identify the issues.

2. Gather information about assets and liabilities.

3. Client shares interests and goals.

4. Client and advisor develop property ownership, sharing and succession principles.

5. Advisor generates creative options.

6. Advisor assists client to evaluate options that are consistent with the principles of the client and estate stakeholders and satisfies appropriately their common and individual interests.

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7. Client and advisor consider the alternatives and advisor assists the client to resolve any conflicting interests and objectives identified in the planning process.

8. Advisor documents any agreement between the parties and the final strategy selected by the client.

9. Advisor supports the client to implement estate representation and management consistent with the estate plan.

10. Advisor and client periodically review the performance of the agreement or as otherwise required by law, adjust the performance of the agreement as necessary.

What practices are to be followed in the initial investigation of the client’s requirements?Identify the client’s objectives, needs and values that have estate planning implications

Identify the information required for the estate plan

Identify the client’s legal issues that affect the estate plan and refer those issues for legal practitioner assistance.

Determine the client’s attitudes and level of financial, social and business sophistication

Identify material changes in the client’s personal and financial situation that :

1. Are either having occurred and requiring response, or2. Desired and therefore a plan to achieve the desired change is needed.

Prepare information to enable analysis

Foundation Knowledge

What is your Estate?The word “estate” is loaded with meanings. For the purpose of this discussion, we are using the word estate in the sense of “all of a person's property, entitlements and obligations”. The concepts of a person’s will, succession and probate are a far cry from the core concept of a person’s estate.

Put simply, your estate is what you have. Family Law divides a person’s estate into financial assets and financial resources. This is a useful distinction when considering the administration of a person’s whole estate. The focus of this paper is not limited to the administration of a person's estate when they die but how they set up the administration during their life, administer it while they are still alive and hand on that administration to the next generations.

What is a legal Issue?It is the knowledge of an application of the law that is fundamental to the role of a lawyer. The Law Society of New South Wales recognises the following elements of legal practice:

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• assistance with analysis and interpretation of legal and factual issues;

• assistance with the enforcement of legal rights and obligations;

• assistance with the authentication and assurance of title to property of any type; and

• assistance with the planning and management of a client's legal affairs.

These elements of legal practice are in turn applied to support the delivery of the following areas legal service:

• Giving Advice - the function of being an authoritative source of legal knowledge; providing interpretation and application of laws and legal principles.

• Transactions - the function of authentication and assurance of title to property of any type.

• Representation - the function of representing the rights and interests of clients, particularly in situations of conflict.

• Design - the function of planning and designing structures, strategies and arrangements which regulate legal rights between parties.

References and further reading

Family Firm Institute– see http://www.ffi.org/

STEP – see http://www.step.org/

Family Office Congress 2008 blog (FOC 2008) – see http://www.dealersgroup.com.au/p3_Events.html?&event=1&page=4

Family Office Exchange (FOX) – see http://www.foxexchange.com/public/fox/welcome/index.asp

Carnegie Management – see

http://www.carnegiemg.com.au/index.html

http://www.executivementor.info/index.html

Family Business Australiahttp://www.fambiz.org.au/

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http://www.fambiz.org.au/

http://www.executivementor.info/index.html

http://www.carnegiemg.com.au/index.html

http://www.foxexchange.com/public/fox/welcome/index.asp

http://www.dealersgroup.com.au/p3_Events.html?&event=1&page=4

http://www.step.org/

http://www.ffi.org/

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