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Securities offered through Linsco/Private Ledger (LPL), Member FINRA/SIPC

Steve Hopkins. Doug Sippel. Securities offered through Linsco/Private Ledger (LPL), Member FINRA/SIPC Financial Planning services through Hall Riback Childress & Gore LLC, A Registered Investment Advisor. What is True Wealth?. What is an asset? What is the most important asset you possess?

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Securities offered through Linsco/Private Ledger (LPL), Member FINRA/SIPC

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  1. Steve Hopkins Doug Sippel Securities offered through Linsco/Private Ledger (LPL), Member FINRA/SIPC Financial Planning services through Hall Riback Childress & Gore LLC, A Registered Investment Advisor

  2. What is True Wealth? • What is an asset? • What is the most important asset you possess? • True Wealth is made up of: • Financial Capital • Human Capital • Intellectual Capital

  3. What is True Wealth? • Social Capital

  4. Divide – Defer – Dump!

  5. What does “Keep it in the Family” mean? • What is your definition of “Family”? • Blood Relatives • Spouses • Children • Step-Children

  6. What is the Problem? • Not enough income to support your retirement & the next generation • Elder Care Costs • Appreciation

  7. What is the Problem? • Property taken out of Production • Losing the ranch? • Taxes • Death, Divorce or second marriage • Lawsuit • Poor management • Losing the Legacy? • Breakup of the family? • Family stops talking to each other?

  8. What is the Problem? • Shirtsleeves-to-Shirtsleeves in three generations • 70% failure rate of wealth transitions* • Involuntary removal of assets from the beneficiaries control • Why? *Source: The Williams Group

  9. Worksheet • Take a minute to write your definition of: • The Problem • Your Goals and Objectives • Your Values • Family to include in planning process

  10. What is the cause? • Misunderstanding the cause • hint: It’s not the taxes! • Professionals asking the wrong questions • Divide – Defer – Dump - Dissipate • Who should get the wealth? • When should they get the wealth • How much wealth should they get? *Source: The Williams Group

  11. What is the cause? • Communications breakdown and lack of trust – 60%*? • Poor Communications – Heirs don’t understand the intentions of their parents • No shared goals • No shared process • No shared experience or actions *Source: “Preparing Heirs” Roy Williams and Vic Preisser

  12. The 8th Habit -- Stephen Covey • Only 37% said they have a clear understanding of what their organization is trying to achieve and why • Only one in five was enthusiastic about their team’s and their organization's goals • Only one in five said they had a clear “line of sight” between their tasks and their team’s and organization’s goals • Only 15% felt that their organization fully enables them to execute key goals • Only 20% fully trusted the organization they work for.

  13. Mackenzie and Emily

  14. What is the cause? • Lack of trust – What messages are you sending*? • Reliability – Do you keep promises? • Sincerity – Do you have a false front? • Competence – “Beginners Mind” *Source: Building Trust, Robert Solomon & Dr. Fernando Flores

  15. What is the cause? • Un-prepared Heirs – 25% • More time spent preparing documents than preparing heirs for the impact of those documents • No mentoring or training to share knowledge and wisdom • No skill/talent/interest assessment • No experience

  16. What is the cause? • All other causes – 15% • Failure of Professionals – 3% • Financial, Tax, and Legal advice • Lack of a Wealth Philosophy and Mission Statement

  17. How is the communication in your family? • Do you have family meetings? • Have you developed “Rules for Talking” • Do you encourage individuals to “Live their Passion” • Conflicts you can’t resolve? • Don’t be afraid to bring in a professional to mediate

  18. Why don’t you start? • Confusion • What do I do and How ? • Fear of: • disrupting family dynamics • Cost of professionals • making a mistake • Procrastination • The tyranny of the urgent

  19. Ownership Family Succession Planning Happens Here Business Why is this so hard?

  20. Common Exit Paths for Family Business • Give the business to one or more children now • Leave it to one or more children after you die • Sell the business to one or more of your children now • Sell the business to one or more key employees or partners • Sell the business to an outside 3rd Party

  21. Advantages of transferring to family • Leave the business to someone you know and trust • Ability to retain control and remain involved • Continue the legacy • Perpetuate the family banking and business model

  22. Disadvantages of transferring to family • Financial Risk • Conflicts over Cash Flow • Business/Management/Family member conflicts • How to treat family members fairly and equally

  23. Fair vs. Equal • What is the right amount of wealth to leave each child? • Look at each child as an individual • What are their unique abilities and talents? • How much is enough? • Your children should “Earn their own” • Consider a “fund” approach • When should you transfer?

  24. Fair vs. Equal • Use Life Insurance to help equalize • Diversify assets to make it easier to divide • Separate ownership – lease to siblings • Land • Cattle • Equipment

  25. Choices True Wealth Succession Planning involves Estate Planning $10 million estate By Default Charity Government Heirs By Design Charity Government Heirs 0% ?% 34% ?% ?% 66%

  26. Financial Realities: Important questions to ask • Do we have enough income to support multiple families? • Have we created another source of retirement income besides the ranch? • What happens if one or both of us need to go into a nursing home? Do we need Long Term Care Insurance?

  27. Family Wealth Philosophy • What is the Purpose of our Wealth? • Provide a Lifestyle, a home, a job? • Provide level of comfort to family members? • Provide educational and occupational opportunities? • Grow for future generations? • Philanthropy?

  28. Important questions to ask • It’s 10:30 in the morning, the day after your birthday 5 years from now… • What are you doing? • Where are you living? • What are your children doing? • Where are they living? • Are you still involved with the business?

  29. Important questions to ask • What’s important to you about passing the ranch to your children? • What’s important about it to them? • What is the net worth of the assets on the Human Balance Sheet? • How do I want to be remembered? • How will I be remembered?

  30. What are the solution(s)? • Have a Process • Step 1: Determine your Goals & Objectives • Step 2: Do a thorough financial analysis • Step 3: Develop Preliminary plan with your Advisor(s) • Step 4: Schedule a family meeting to share your Goals & Objectives and seek input from family members • Step 5: Finalize the plan based on family input • Step 6: Implement the plan • Step 7: Continue family meetings as needed

  31. What are the solution(s)? • Family communication system • Include the entire family – Spouses and minor children also • Parents don’t give up control – seek input • Shared process - Shared definitions of success • Communication skills training for building trust • Consensus leads to clarity of purpose

  32. Resources

  33. What are the solution(s)? • 5 Primary Estate Planning Strategies • Maximize Valuation Discounts • Credit Shelter Trust – Preserve the credits • Gifting – Lifetime transfers are less expensive • Use Life Insurance Leverage • Give away the Estate Tax to Charity • Grow the wealth – reduce the tax • Family Asset Allocation

  34. What are the solution(s)? • Other Important Tools • Pre-nuptial Agreements • Diversify the Balance Sheet • Cash Flow Analysis • Create a Balance sheet of Human and Intellectual Capital

  35. What are the solution(s)? • Family Meetings • Use to communicate with all family members • Hold at least annually • Use a Facilitator • Use to educate all family members • Financial Planning • Estate Planning • Charitable Planning

  36. Why is it important to have a written plan? • Creates peace of mind • Eliminates conflicts and emotional decision making • Decisions based on financial reality

  37. Why is it important to have a written plan? • Eliminates or reduces the risk of : • Asset concentration • Liquidity events – 5Ds, 1 B & 1 R • Death • Disability • Disease • Divorce • Demand for Dividends • Bankruptcy • Retirement

  38. Why is it important to have a written plan? • Increases the value of the business and confidence of: • Lenders • Investors • Customers • Vendors • Family members

  39. Why is it important to have a written plan? • Greater family wealth transfer to future generations • Reduces capital gains and estate taxes • Creates a proper valuation for the business

  40. Why do you need a team of specialists? • This is a unique, and complex set of issues • Most advisors don’t deal with these issues on a regular basis • They don’t have a shared process • Don’t operate as a team • Good communication is critical

  41. Personal Financial Plan Business Continuity Owner’s Exit Objectives Wealth Preservation Planning Business Valuation Insurance Needs EXIT PLAN Organization

  42. Conclusion • What is most important? • What is financially feasible? • Does your family understand the tune you’re tapping? • Do you want the default plan? • Do you have a team?

  43. Action Steps • Commit to start Today! • Write down what’s important • Work with a team of succession planning specialists • Attend another workshop • Schedule a Family Meeting • Action Step…24 Hours

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