How to Preserve Your Family’s Wealth
Personal_Finance / Taxes Jun 23, 2015 - 12:02 PM GMTBy: Investment_U
I remember the scene well. It was the middle of drizzly, cool morning when the hum of the floatplane’s engine echoed through the mountains. The plane circled overhead once and landed on the strip of saltwater in front of us.
Once the plane’s pontoons were resting against the dock and the motor was quiet, the back door of the tiny Cessna opened.
“I hope this is worth it,” the billionaire stepping out muttered.
He’d flown to a remote part of southeast Alaska to meet with us. He was there - just for the day - to talk about a deal. He’d fly out by dark.
This man had his own money, but he married the right gal. Her maiden name was Walton.
And now he was with us, looking to add to his wealth.
It’s no secret how the Walton’s made their money. There’s a Wal-Mart in every big town. But few folks truly understand how they’ve managed to grow and protect their wealth.
On our journey to unleash liberty through wealth, it’s vital to understand this simple trick.
It will take only an hour or two of your time, but when you make the move, you’ll instantly join the likes of Bill Gates, the Waltons and countless other successful investors who understand the only way to overcome mediocrity is to take wealth creation seriously.
It means being smart about building and protecting your wealth. In the case of the Waltons, it’s about funneling wealth through a family LLC.
It’s a simple concept that any investor can use.
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There are several advantages to a family LLC - like the ability to pool money, tax savings and simpler wealth transfer between generations. But the key to it all lies within the framework behind the LLC, known as the operating agreement.
With a smart operating agreement, you can find immense protection that you wouldn’t be able to get outside of a corporate structure. For example, you can keep family members from selling their shares of the LLC without permission of the family. It keeps money in the pool and ensures an “independent” family member doesn’t waste his wealth. It also adds protection in the case of a divorce.
Even better, you can limit distributions. In our litigious world, this is a vital idea. It means if one member of the family gets into legal trouble, his assets are protected within the LLC. With the right operating agreement, it’s very difficult for creditors to pull assets from the LLC.
That’s huge... and it’s certainly saved the Waltons countless dollars.
Some of the other advantages are more familial, but are equally important. The LLC structure forces a family to discuss their assets and work together to build them. It also allows the members to explore options and agree on how their money will be invested. You can even set it up so each member has to make regular contributions to the fund.
What’s best though is the structure creates a conduit for financial literacy. It ensures the next generation of investors is aptly prepared for its responsibilities and that it has a sense of the family’s financial legacy.
That idea is quite apparent in the Walton’s family LLC.
Three times a year, Sam Walton’s descendants gather to discuss and vote on how they will manage their fortune. They watch presentations from officials at the companies they own (they have a stake in a whole lot more than the retail stores) and they discuss, as a family, where to head next.
As we celebrate Father’s Day, I find myself pondering the legacy I’ll leave my children. I urge you to do the same.
If you haven’t made the move already, explore the idea of creating a family LLC for your investments. You can set one up online in about an hour.
If you’re a father, it’s a way to twist the ties of tradition. It’s your chance to give an invaluable Father’s Day gift to your children.
It’s a gift that will span generations.
Good investing,
Andrew
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