Here’s a F.A.S.T. Solution to Legacy Planning

In last week’s Family Legacy Planning email, we stressed the “last chance” opportunity to take advantage of the $11.7 million estate and gift tax exemption before it reduces by half or more—“use it or lose it.” Now is an ideal time to use that exemption to invest in your family. By funding a FAST (Family Advancement Sustainability Trust) now, you can help your family avoid falling victim to “shirtsleeves to shirtsleeves in 3 generations.” Statistics show that 90% of families fail. A FAST can improve the odds that your family will be one of the 10% who succeeds.

We have all witnessed the disaster when an inheritance passes into unprepared hands. Families who succeed engage in best practices like family meetings and family education, all aimed at preparing heirs to be responsible inheritors. In my experience, the biggest issue that keeps matriarchs and patriarchs awake at night is worrying about how their kids will handle all that life throws their way. A FAST equips your family to remain healthy and connected through the generations.

In a nutshell, the FAST does two things:
(1) It is funded with assets that will be used to pay for family enrichment and family education activities such as family retreats, family travel, and preserving the family’s heritage, as well as maintaining legacy real estate assets the family wants to pass down to future generations; and
(2) The FAST appoints trustees/committees who are paid to do the legwork in planning these activities and making sure they happen.
The end result is a gift to your family of a meaningful and lasting legacy.

Our experience is that when Generation 1 (“G-1”) hears of the best practices of successful families, it embraces these activities, pays for them, and will make sure they happen. G-1 has hopes and dreams that future generations will continue to engage in these best practices, but the reality is that after G-1 is gone, G-2 often drops the ball. G-2 may balk at paying for them, and G-2 often is too busy or preoccupied to do the legwork in planning them. The FAST is a practical tool to help the family continue the process of preparing heirs. It can be an add-on to an existing estate plan without disrupting the existing plan. With the current all-time high exemption, now is the ideal time to fund assets into the FAST.

Here’s another tip: You can substantially leverage your gift by using the funds in the FAST to purchase a life insurance policy on G-1. When G-1 is gone, the proceeds are paid into the FAST free of estate tax and generation skipping tax. With proper planning, you can endow your family’s success for many years to come and fund a legacy that will live on long after you are gone.

Marvin E. Blum