Cultivating a Family Legacy with Grandkids

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May 06, 2016

Grandparents who want to cultivate family legacies and instill treasured family values in their grandchildren often turn to trusts, college tuition and financial gifts.  Families are also discovering that simple family heirlooms — a revealing letter or an old photo —  can be powerful ways to convey the family’s unique past and keep their heritage alive. These types of gifts can be both lasting and meaningful.


Case in point: one Minneapolis couple’s recent gift to their grandson was nothing short of a historical family experience, as it came complete with old documents, photos and a story about the founding of the great-grandfather’s business.


It happened when they revealed the existence of a trust designated for their 18-year-old grandson during a multigenerational meeting.


They explained the intricacies of the trust during a meeting that included the grandparents and parents along with their Private Client Reserve team, which included Wealth Management Advisor Bryan Polley and their Trust Officer and Portfolio Manager.

Polley spent weeks helping the Minneapolis family devise a plan that would communicate the family’s history, values and charitable intent to their grandson. The family provided the vision; it was simply a matter of figuring out how to best communicate the information.


Under the direction of the U.S. Bank team, the meeting began with a priceless conversation about the family’s values, philanthropic vision and the history of their wealth. The grandson was even shown a drawing of the tool that launched their fortune and a Depression-era letter detailing his great-grandfather’s business dealings.

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May 06, 2016

The Private Client Reserve team then discussed their roles and reviewed details of the grandson’s trust as his eyes got wider and wider. Having earned his full attention, the team was able to review smart money concepts and the value of setting up a checking account and credit card so that his parents could provide him with financial guidance prior to college. They also explained the importance of a solid credit rating to help him maintain his wealth over time.


“It’s a really good idea to communicate with the next generation or two down and to share what’s important to you, including your values about money,” Polley says.


Additionally, Polley notes that the grandparents were pleased that their grandson had an opportunity to meet The Private Client Reserve team and understand each of their roles so that he could interact directly with them in the future.


Seventy percent of wealthy families lose their wealth by the second generation and 90 percent by the third, according to “Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values” by Roy Williams and Vic Preisser, 2003.










“The biggest reason is lack of trust and communication among family members,” Polley explains. “Preserving your legacy can improve those odds. The key is to involve beneficiaries in a meaningful way and establish good communication.”


Options for passing on the family legacy


There are additional options for passing on a family legacy. Visual representations of the family are helpful on both ends. U.S. Bank routinely creates family trees for clients working on their estate plans. “It helps families visualize [their needs] and starts conversations,” says Nancy Hermann, a Trust Officer at The Private Client Reserve.


Families should sit down and reflect on the philosophy they want to communicate to future generations. “More and more, we’re talking to clients about having deeper discussions during their lifetimes about the gifts they’re planning,” says Hermann, who leads the bank’s personal trust team in Chicago. One tool her clients find useful is a statement of intent, which enables them to document their history and culture. The extra documentation helps lessen the potential for future controversy and helps ensure that future gifts and trusts will be administered in a way that is faithful to the benefactors.



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May 06, 2016

Gifting options


Values and traditions can help determine which gifting option is most appropriate for a particular family. There are a number of popular gift options to consider, each of which has risks and should be discussed with tax and legal advisors prior to implementing a plan:


  • 529 Plan — Provides funds for future college costs that are exempt from federal taxes.
  • UTMA (Uniform Transfers to Minors Act) Account — Provides a simple way for a minor to own securities in a trust without requiring the services of an attorney to prepare trust documents or the court appointment of a trustee.
  • Irrevocable Trust — Offers tax advantages and protection for beneficiaries and may also be used to fund private foundations and charitable trusts.
  • Irrevocable Life Insurance Trust (ILIT) — Passes wealth on to beneficiaries to help provide for their income needs, avoid taxation of the death proceeds and shelter property from creditors.
  • Grantor Retained Annuity Trust (GRAT) — Minimizes tax liability when intergenerational transfers of assets in an estate occur. 
  • Dynasty Trust — Allows for the tax-efficient transfer of assets to succeeding generations by harnessing the power of compounding over time. This helps increase the value of estate assets and eliminate the asset erosion created by estate and gift taxes. 
  • Donor-Advised Fund (DAF) — Makes it possible to contribute to a pool of funds created and controlled by the owner to manage charitable donations; instills a philanthropic mindset in future generations. 
  • Private Foundation — Allows for charitable contributions that are deductible if the foundation qualifies for tax-exempt status; instills a philanthropic mindset in future generations by allowing them to be involved in the grantmaking process.

“Family values are what’s going to allow these types of gifts to make an impact that will, hopefully, be passed on to many generations,” Polley concludes.


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