Last month we discussed how the Family Wealth Counseling (FWC) approach to planning uniquely helps people understand that there is more to money than what it can buy. Here, we will touch on how by exploring and incorporating three distinct aspects to each family's wealth: financial, social, and emotional, we can hope to achieve superior planning results and maximum benefits to the family.

Financial: Profit and Loss

The first aspect of wealth addresses the tangible material benefits that a person's wealth provides to him/her or the family. It is made up of balance sheets, profit and loss statements, bank accounts, investment summaries, tax returns, etc. Very little of planning for most people goes much beyond the first level. Most wealth planning seems to be simply a matter of "improving the numbers."

Beyond the analytics, however, when determining an appropriate plan of action, FWC does not stop with a look at the balance sheet or a tax table. If the planning process only addresses the financial aspect, families will end up leaving far more "human" and "intellectual" capital on the table than they ever will take off.

If you were to pass away tomorrow, how would your loved ones have instructions on where to go for documents, statements, balance sheets…would they know how to interpret them?

Social: Taxes versus Philanthropy

Most people see their wealth as a block of assets owned and controlled by them ... but this wealth is actually divided into two distinct categories: social capital and personal capital. The personal capital is what we get to pass on to the next generation without restriction, and social capital is the portion of our wealth that does not belong to us, even though we have temporary control over it. This is the portion of wealth that must be allocated to provide benefits to the general welfare of this country. It is the law.

Without proper planning, our social capital may go to programs, causes, or purchases by the federal government in which we do not prescribe. With FWC, families can choose to self-direct that same social capital to worthwhile charitable causes and organizations meaningful to them. If charities have to compete with heirs for personal capital, ("charity begins at home") charity will lose. However, when charitable causes are put in competition with the IRS for the family's social capital, charity always wins. Everyone with wealth is going to be a philanthropist in one form or another.

If you are given the choice between benefiting a cause that has enriched your life versus indiscriminately handing it over to the federal government, who would be the recipient of your social wealth?

Emotional: Supporting Your True Values

The most intimate and critically important aspect of wealth falls into the emotional realm. Each person must answer, "What is the purpose for all of my work and accumulation of wealth?" During the accumulation phase of life, the answer seems easy…to become financially independent, or some like sentiment.

Once having accumulated financial wealth, however, often the simplistic answers no longer seem adequate or satisfying to life's vision. Unfortunately, people are seldom discussing these intimate and personal issues with their existing advisors. Many advisors believe it is not their place to discuss these emotional issues. But how can a client bring up such sensitive issues with all the accompanying planning considerations if they do not even know what questions to ask or what tools exist? Who will tell them? Who will challenge them? Who will help them dream beyond themselves and find the significance they desire out of the wealth they possess?

In Part III, we will discuss "Finding Life's Purpose" and the four fundamental desires that must be fulfilled for meaning in life and to learn to focus on your true planning values.