Just What Are You Trying to Achieve?
The subjects I cover in this space typically have something to do with families who’ve accumulated a certain level of wealth, who eventually get to the stage where transitioning that wealth to the next generation has become a priority.
When I work with such families, it’s always simpler when they’re still early in their journey, because when they start fresh, I can guide them through some of the important considerations that I know will become pertinent down the road.
Oftentimes they’ll have already begun with some of the legal and structural preparations that other professionals have suggested in good faith, but that end up causing issues on the human and relationship side of the family’s reality.
All of this preamble is designed to set up a look at making sure that a family’s transition plans are actually “fit for purpose”.
Consumer Protection Origins in the UK
The term “fit for purpose” is one I’ve heard off and on in recent years and at some point I noted it as a possible blog topic.
As I dusted it off recently, I decided to do some quick research and found that its origins are based in the UK, and derive from consumer protection laws.
That is, if a product is deemed to not be “fit for purpose” the purchaser can return it for a refund.
The term later got renewed life in a political context when an opposition party stated that someone or something in the government was not “fit for purpose”, and when that story got legs, the term became part of the lexicon.
So why am I bringing this up in a family wealth transition blog? I’m glad you asked.
Asking Some Basic Questions Is Key
When we attempt to determine if anything is “fit for purpose”, the first question that begs is “what is the purpose?”
Getting back to the general topic of planning for a transition of wealth, such plans are typically supposed to tick a number of proverbial boxes, i.e. they have multiple purposes.
Having both the wealth AND the family relationships survive the next generational transition are usually among the goals families have.
But because relationships are nebulous and hard to define, this can play second fiddle to other purposes that are more easily quantified, like, oh, maybe, saving taxes?
Most clients’ heads will nod when presented with an iron clad plan that guarantees that they’ll owe less taxes, without getting into the details of the side effects of such plans that may impinge the family relations purpose noted above.
Doing Things “On Purpose”
If we think back to our childhood, our first exposure to the word “purpose” was likely in the context of a sibling interaction where someone got hurt and then blamed the other.
“He did it on purpose”, you may have exclaimed to the nearest parent.
“No, it was an accident”, the other would say, in their defence.
So here we have our first nugget, one “opposite” of doing things on purpose is getting something haphazard, i.e. by accident.
As long as we’re looking at expressions that contain words about purpose, regular readers already know my love for the Purposeful Planning Institute and the great community I belong to thanks to that group.
For All Intents and Purposes
The word “intent” gets combined with purpose in the expression “for all intents and purposes”.
Families I work with need to be very intentional about how they make sure that their relationships will remain strong.
“Things don’t just happen by themselves”, I often tell them. This takes work and families need to be very intentional.
Getting back to “fit for purpose”, my intention here is to make sure that families make the effort to consider how their plans to transition their wealth are going to impact their family relationships.
Very Fit for One Purpose, Unfit for Others
Too often, some of the decisions families are advised to make for one purpose, like saving taxes or making sure that access to the wealth is severely limited, end up creating undesirable side effects.
I try to make sure families think through their choices so as to avoid those shortcomings.
Openly sharing the purpose of what the family is trying to achieve is also a big part of how families succeed, because that transparency is part of the solution too.
Continually asking “what are we trying to accomplish” never hurts.