Generous Giving : Planning and Your Progeny: An Heir-Raising Experience

Bible on Money
Research Library

Home > Research Library > The Business of Giving > Planning Gifts > Charitable and Estate Planning

Planning and Your Progeny: An Heir-Raising Experience

By David Wills

David Wills is president of the National Christian Foundation in Atlanta, Ga. He delivered this speech at the annual Generous Giving Conference, Orlando, Fla., February 19-21, 2004.

Several years ago Ken received a phone call from someone who had been trying to buy his company for two years. Ken didn’t feel right about selling the previous years because he felt like a big year was coming up, and he was right. One year his company more than doubled its size. When he got the phone call from the national competitor, their offer from the prior year was triple what it had been. He hung up the phone, called his wife, Debbie, and said, “This is the year. We are going to sell the company.” It was his baby, and they made a right decision.

The first thing they did was get their house in order. They went through a very lengthy planning process and were very excited.

This couple had three grown children and even more grandchildren. They were very generous people and had planned on doing some significant giving with the sale of this company. They were wise to do the planning before the sale occurred, since it saved them millions of dollars in taxes.

They went through the planning process and came to a decision. They decided that they were going to give each one of their children $1 million. The sale of the company was between $25 million and $30 million. They had been giving the maximum amount they could every year to their children and to their grandchildren. They decided to give each $1 million and to give the rest away.

After the planning process was completed, we had a family meeting, and they were very excited to share this news with their children. They went through the whole plan, explaining what they were going to do. Their kids just gave them a blank stare. All of their children were committed Christians and had exhibited generosity to what they thought was a great degree. Still, their kids were absolutely mortified that their mom and dad were going to give away their inheritance, and it crushed them.

I want to talk about the process of planning and dealing with your children before coming back to tell you how Ken and Debbie’s story has turned out.

Estate Planning: Three Keys

Although there are more than three keys to planning, I want to start with just three. First, it is not about the money. Money is a mirror, a mirror into our hearts and a mirror into our lives. It can be somewhat uncomfortable to deal with this issue, and many families face this problem. Money will let you know what your real passions are. One of the reasons Christ spoke about it so often is that it reveals our hearts. In addition, money will tell you a whole lot about your relationships: your relationship to your heavenly Father, your relationship to your earthly father, to your spouse, to your children. It will even reveal to what degree you are a disciplined person or not. Money is a revealing thing. It is a mirror. For the most part, men don’t like mirrors, and men don’t like to deal with money issues, but it is very important.

Next, those who are well planned give more wisely. Actually, people who plan well give far more as well as give more wisely. I am not only talking about giving to charity, but I am also talking about giving to your children and your grandchildren.

Last, until we set finish lines, we cannot give as God intends.

The first thing I want you to do is answer this question for me. If it is not about money, what is it about? What is greater than money?

Estate Planning: Four Issues

What comes to your mind when you think of estate planning ... Avoiding taxes? Dying? Expensive? Children? Trusts? Most people immediately think of the tools when they think about estate planning. But there are grits that you don’t eat and there are cue tips that you can’t use to clean your ears.

Here is a definition of estate planning: the orderly distribution of one’s wealth into fees and commissions. That is how most of us feel about it, especially men. They don’t like to plan their estates and that is why.

Good estate planning is often not good tax planning. Attorneys usually react negatively when there hear me say this because the bent of most advisors is that good estate planning is by definition good tax planning. But for people that are generous, that is not always the case. Wealth transfer planning is a process. It is not a point in time. There are lots of “what ifs” that come into the planning process, and they change all the time. You can have things come into your life; you can have children or grandchildren come into your life who have different needs. You might have a grandchild or a child that has a special need that makes it completely different from dealing with others. Business succession issues are significant with regard to this matter. If you are not going to liquidate the business and you are going to pass it on to your children, your kids will not all get together in a room and decide who has the best skills and commitment, and one will not volunteer with the rest saying, “This is our choice.” It doesn’t work that way. It is very complex. When you have business succession issues, there are three things that you have to think about: your business, yourself and your children. Men, your wives know more about two out of those three, so it is very important that you keep them in that process. If you don’t, you could make a significant misstep.

It has been said that people spend 40 years accumulating wealth, 20 years either preserving it or indulging themselves in it, and not six hours thinking through the disposition of it. I am hoping that this talk will help you to think about financial planning and cause you to act.

There are four major issues that I want you to think through with regard to planning. First, you need to think about the needs and wants—which are different—for both yourself, your children and your grandchildren. You have to process this issue over time.

Then you need to address the issue of giving, goals and plans that need to be made. The truth is that we don’t have much time. How can I effectively illustrate the brevity of life? I went to www.deathclock.com, a Web site whose byline is, “The Internet’s friendly reminder that life is slipping away second by second.” If you’ve been to this Web site, then you know it’s a humbling experience. You put in your age, whether you are a male, and whether you are a smoker, in addition to some other things. The site tells you the date you are going to die and how many seconds you have left to live. It is ticking away—tick, tick—and you watch it go.

An extremely ineffective way to plan is to go to your advisors, who will listen to you for 30 minutes, ask you about four questions and then tell you what tools you need to accomplish your objectives. When you do that, you will set up instruments and tools that will not meet your objectives. Last year we met with a gentleman and his planner and asked him a very simple question. He had set up family limited partnerships. He had done everything he could to give as much to his kids as possible. We asked him a very simple question: “How much do you want your kids to get?” He knew the answer to that question. Next we asked, “How much are you worth today?” We found out that he was going to be giving his kids about 60 times what he wanted to give them, having gone through the normal planning process. That is what your advisors will typically try to do, and he got very upset with his advisor sitting right there watching.

The average age of a widow in the United States is 55 years old. Men need to focus on getting their houses in order because someday your wives will ask the question, “What am I going to do now?” and you will not be there to answer it. Wives need to help their husbands with this process and decide together how to handle their estates. I suggest going out on a date to talk about financial issues, or begin making a list of things you need to do to get your house in order. Things such as these will help begin the process.

Estate Planning: Nine Vitamins

The most frequent questions we get are concerning children. These are the hardest and most challenging questions with which we deal, and I want to give you a basic framework for approaching the issue of wealth and your kids. There are nine essential vitamins:

Vitamin A: God’s word. Ecclesiastes 7:11-12 says, “Wisdom, like an inheritance, is a good thing and benefits those who see the sun.” Inheritance is not a bad thing. Wisdom is a shelter as money is a shelter, but the advantage of wisdom is that wisdom preserves the life of its possessor. Both of them will protect, but only one of them preserves. The other eight essential vitamins build off this verse.
Vitamin B: Understand the relationship between the three forms of transferable capital—the spiritual, the character and the financial. The most important capital that you can transfer to your children or your grandchildren is spiritual capital. Spiritual capital is salvation in Christ and the ability to understand and apply God’s word in our lives. There is no better investment in your children or your grandchildren than to pass on spiritual capital. Like spiritual capital, character capital is a non-tangible transfer. Character capital involves things such as integrity and honesty—in short, basic character issues. Least important is financial capital. Spiritual capital is necessary for the development of true character capital. A strong work ethic is usually necessary to build strong character capital. These build on each other, so if you don’t buy one of them, the whole house of cards falls down. If spiritual and character capital are strong, it may be advisable to impart financial capital. That is where the decision of how much should go. If spiritual and character capital are not strong, it is typically not advisable to impart financial capital. Keep in mind, it is not about the money itself; it is about what the money can do to you or for you. Some things that are greater than money are good, and some things that are greater than money are very evil, as the Scriptures say.
Vitamin C: Do no harm. You need to think through a worst-case scenario regarding how you pass wealth onto your children or your grandchildren. The philosopher Socrates said, “What mean you, fellow citizens, that you turn every stone to scrape wealth together but take so little care of your children to whom one day you relinquish it all?” You can also put the word “spouse” in there. Andrew Carnegie said, “I not only ask, ‘Will my fortune be safe with my children,’ but, ‘Will my children be safe with my fortune.’ ”
Vitamin D: Ask hard questions. Will this transfer of wealth build spiritual capital in my children? We generally skip over that question because we don’t typically think of financial capital building spiritual capital, but it certainly can. Will it build character capital in my children? Will it negatively impact a strong work ethic in my children? Remember that a strong work ethic is usually necessary for development of strong character, which is very important to us with our children and grandchildren. Will it increase their standard of living without them having to work for it? Will it give Satan an opportunity to bring calamity? That is the worst-case scenario, but something you need to think about. How could he do that? While I am alive? When we pass away? It works both ways. Consider these questions: How much of your net worth did you receive as an inheritance before age 45? By that age, you are going to know almost for sure whether those who are coming behind you have the ability to well manage financial capital. How much of an inheritance did you get before you turned 45? Were you given the opportunity to develop a strong work ethic prior to receiving an inheritance? Are you thankful for those years? Why or why not? Was the development of this work ethic important in the development of your character capital? Would you want to possibly deprive your children and or grandchildren of this important aspect of life?
Vitamin E: Leave less rather than more early on. Simply stated, put it out there and watch what happens to it. Use it as a test. I am not talking just about financial capital from a spending standpoint. Get your kids engaged in the giving process. If you have a foundation, get them engaged in the investment part of your foundation. Get them engaged, watch what they do, and you will observe to what degree you have discipled them. Ken and Debbie in the opening story didn’t do this at all with their children, so their kids weren’t engaged at all and got blindsided when we had that meeting.
Vitamin F: Don’t ask how much you can leave your kids; ask how much they will need. If you leave a substantial amount of wealth to your children and they become successful, people will say that they only made it because they had all that money. If you leave a lot of money to your children and they are unsuccessful, people will say they are unsuccessful because you left them all that money. It is a two-edged sword, so you need to process this decision carefully.
Vitamin G: The goal is to leave behind kids who are content whatever the circumstances, as Paul says in Philippians 4. When your kids are content whatever the circumstances, you know that they are able to handle financial capital. True spiritual capital, true character capital will be developed by that point. Christian financial advisor Russ Crosson says, “If we produce kids that are productive and content, and this has been tried and tested, it almost doesn’t matter how much we leave them. If our children are consumptive and discontent, we won’t be able to leave them enough, and they will dissipate it rapidly.”
Vitamin H: Handle the “equality” issue with great care. This is the number-one issue with regards to dealing with children. Randy Alcorn writes,
That is a very wise statement, though difficult, and very few people follow this maxim.
Vitamin I: If your kids don’t want an inheritance, they are good candidates to receive one. What would your kids say if you told them you were giving it all away? If they responded positively, then you should feel much freer to leave them financial capital because they will become faithful stewards of it in your stead.

Estate Planning: Communicating across Generations

It has been seven years since we had that meeting with Ken and Debbie and their family. After that, they focused on engaging their children in the process of giving and handling wealth. Even though all their kids were doing a good job, they needed to bring their children on board, and now their kids are embracing it and are excited about it. You can start the process, and you can grow your children and your grandchildren in this issue.

Ken and Debbie’s biggest problem was that they failed to communicate. I had a couple several years ago going through the planning process, and we got everything in order. He went through a questionnaire, thoroughly processed everything out, made some very hard decisions—very good decisions, very wise decisions. He was a very quiet man, a very successful man. We finished the process, and I told him it was time to have a family meeting. All of his children were grown. In fact, he had some grown grandchildren. They didn’t really know what he had, what his family was worth at all. He looked at me and said, “I have to be honest with you; I am very uncomfortable doing that.” I looked back at him and said, “Here is the deal. A family meeting is not an option. We are going to have a family meeting. You can either be uncomfortable and present or you can have an empty chair and be dead, but one way or another, we are going to have a family meeting, and all this stuff is going to come out.” I can assure you that Ken and Debbie are thankful, very thankful, that they sat down with their kids and grandkids and that they have communicated these financial decisions to them because it gave them the opportunity to change a lot of what they were doing.

In Luke 12, we have the parable of the farmer who was very successful. He decided to build bigger barns. And remember what happened to him? Deathclock.com got him. Immediately his seconds were gone. At the end of this parable we read, “This is how it will be with anyone who stores up things for himself but is not rich toward God.”

I will close with this formula: Where in your life are you building bigger barns versus laying up treasure in heaven? What does that equation look like for you?