0:00:00.0 ANNOUNCER: The financial views and opinions expressed by the host and guest on this program do not necessarily reflect the viewpoints of 107.7 The Bronc, Rider University or Certified Wealth Management and Investment. The material discussed is not designed to provide the listeners with individual financial, legal or tax advice.
0:00:16.6 ANNOUNCER: Show me the money!
0:00:18.6 ANNOUNCER: Where’s my money, man?
0:00:21.8 ANNOUNCER: Faster. Faster.
0:00:22.7 ANNOUNCER: Here comes the money.
0:00:25.8 ANNOUNCER: Here we go.
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0:00:25.8 ANNOUNCER: It’s time to grow your bank as 107.7 The Bronc presents Master Your Finances with Kurt Baker, a certified financial planner professional with Certified Wealth Management and Investment. Kurt and his team of financial guests will help you turn those singles into seas of green and plan your financial future accordingly. Now, here’s your money managing host for the hour, Kurt Baker.
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0:00:54.2 Kurt Baker: Do you understand why families feud over inheritance? How would you know if your family is safe from an inheritance battle in the future? Cindy Arledge, a Purposeful Planning Institute member and second generation entrepreneur from Texas, works with growth-minded entrepreneurial families to eliminate known wealth transfer risks, create a we over me culture and build sustainable systems to create lasting wealth. Based on our years of experience assisting business owners and preparing their families for a successful wealth transfer, Cindy will teach you three steps to protect your family. Cindy, thanks so much for coming on today. I know this is an interesting area that we, as wealth advisors, our community is told that we need to really sit and talk to the families. So we often are advisors for individuals or a couple, things like that. But especially when you’re dealing with higher net worth or ultra high net worth clients, as we do here, you really need to get the whole family on the same page. Now, for you to step out and actually know this is kind of unusual, so do you wanna tell us a little bit of back story why you’re such an expert in this area and how you came to be who you are today?
0:02:10.8 Cindy Arledge: Well, first of all, I’d like to say thank you for inviting me here. It’s a pleasure to spend this time with you. And the second piece in a simple term is just experience and being unprepared. My parents passed away eight months apart in 2005, and unfortunately the in-fighting in the family started even before my dad passed away. We were a pretty dysfunctional family as some entrepreneurs are known to be. And even though there was a will in place, and Dad had done his best to prepare me… First of all, I didn’t believe him. He said I’d have trouble with his sibling, and I was like, “That won’t be. His problem was with you, dad. He’s never gonna have a problem with me.” Well, I was unfortunately very wrong in that. And so, in a nutshell, it’s experience and then turning my mess into a message to help other families.
0:03:04.7 Kurt Baker: Right, and as you’re pointing out, I think you just pointed this out, a lot of times I say, “You don’t really know who somebody is until you through an inheritance with them together, right?” [chuckle] So…
0:03:13.4 Cindy Arledge: That’s exactly right.
0:03:13.8 Kurt Baker: That’s when you really find out who they truly are and that’s a shame because over and over and over again, we hear stories about that. Celebrities, you hear about it all the time where battles that go on for years and years and years. Martin Luther King would have take 40, 45 years or something finally to make some decisions on that. I think it was his Bible, I think you said, and some other things. So it could take a long time.
0:03:34.4 Cindy Arledge: His Bible and his Peace Prize.
0:03:36.3 Kurt Baker: There he goes, Nobel Peace Prize. Right.
0:03:37.5 Cindy Arledge: His Peace Prize, they fought for almost 50 years over his Peace Prize.
0:03:40.4 Kurt Baker: That somehow sounds very ironic, doesn’t it? To me. [chuckle] That’s not the idea behind it, right? But, as you point out, this is a big big problem and most of us don’t really pay enough attention to this, we have to communicate multi-generational, right? So, tell us how you… A little bit about the story you got started, so what did you do from there? Your experience there, what happened?
0:04:02.3 Cindy Arledge: Well, one of the most challenging times I went through is writing that check to the IRS, which ours was $1.8 million, and then you wait to see if they will accept it. And nobody prepares you for that waiting period, that waiting zone of you know you’re gonna receive an inheritance, but it hasn’t happened yet, and so you’re just kind of in this waiting period. And during that time, I found out I was confused about money. Which would make sense because my mom used money for love, and my dad used money for power, and in that waiting period of expecting to receive a couple million dollars, I was totally confused. So being a life-long learner, I decided to just learn, learn about money. And because money is an amplifier, whatever your relationship is with money, before you get more of it, it will be more of what that is. So if you’re greedy, you become more greedy, if you’re generous, you become more generous, if you’re confused, you become more confused.
0:05:03.1 Cindy Arledge: So I spent that time really digging in and I was shocked and somewhat appreciative to learn that what had happened to us is, I would say, normal, if it happens to 70% of families. Like over 70% of families will have a loss of assets in that first transfer.
0:05:26.6 Kurt Baker: Wow.
0:05:27.9 Cindy Arledge: And so that made me kind of feel better. Well, at least we’re not the only ones going through that.
0:05:32.5 Kurt Baker: Misery loves company huh? [chuckle]
0:05:34.5 Cindy Arledge: Yeah. And then when I discovered that less than 10% of families are able to keep it to the third generation, that was even more shocking because my mom and dad were depression air babies and worked their whole life and really wanted to give us, kids and their grandkids an advantage. And they spent a lot of money with attorneys to make that happen and before they were even gone, we were already fighting over and losing it. It was just so shocking to me. So instead of studying the people that weren’t successful, I set out to just study the people who were. And in doing so, I found the family office industry, and I found these legacy families that are able to retain well past the third generation and longer, and what was fascinating to me is that their success lied on the family, not the money.
0:06:20.2 Kurt Baker: Right. Yeah, that’s very true. Yeah. So, it’s important, as you mentioned, the family office experience where everybody kinda works together, all the experts, the accounts, the attorneys, the advisor, things like that are more in coordinated effort, which doesn’t always happen in our industry, unfortunately, right? And so, that’s an important part of really making sure things are done correctly when the experts literally talk to each other and involve the family and the generations that are involved as well. Everybody has to be involved to make sure it’s all going as we would want it to go, correct?
0:06:51.5 Cindy Arledge: Well, and yes, that point and the people had a plan for the advisors to work with the family. They knew what they wanted. It wasn’t just some… Like my mom and dad, he built a $10 million empire and wanted it to help his kids but had no plan on how to do that, and in fact, because he changed his mind and there was… My mom was an Alzheimer’s patient, their wills didn’t even match.
0:07:18.8 Kurt Baker: Oh, goodness.
0:07:20.5 Cindy Arledge: So, there was… Oh yeah, it was crazy.
0:07:22.4 Kurt Baker: As you probably know, with business owners, when they think they’re gonna hand it off to the children, and they go, “Oh, well, I’m just gonna give it Johnny. He likes to run businesses, and Susie, she doesn’t really want to,” and so what happens when this happens because they’re like, well Susie says, “Well, I still want my money,” and Johnny says, “Well, I’m the one working.” So you have to kind of walk through that whole process about what’s fair to everybody. Is that kind of what we’re talking about a little bit?
0:07:47.4 Cindy Arledge: That is a piece of it. What I’ve discovered that I help my clients with is actually start an on-the-job training program before… While you’re still alive to mentor them. Because oftentimes, we ask our kids to take over businesses that they don’t want, and they’re not very good at. So many times, selling the business at the height of the value and then finding a really great wealth advisor to grow that wealth and purchase wealth at a discount for future generations is a better legacy than trying to pass a business that may or may not fit with the gifts and talents of the next future generations.
0:08:26.6 Kurt Baker: Oh, I would have to agree 100%, ’cause you see, you see some families where they do, they transfer the business. You see other families where maybe one or two people wanna buy out the business from the rest of family, and others were like, “None of us wanna be in that business. Let’s just take the highest and the best value with what we can, and then we’ll decide what to do with the assets once you’ve liquidated,” so to speak, and you transfer that. And there’s different strategies for each of those. They’re not all handled the same way, right?
0:08:57.0 Cindy Arledge: Exactly. And then as a family memory, you can create rules, which is what I do, the legacy planning, a set of governance of how to make decisions on how to use that money in future generations.
0:09:10.3 Kurt Baker: So how do you start this process? So now, if we recognize, hey, some parents don’t wanna talk to their kids about money, some people don’t wanna have these conversations. I know… I’ll speak to myself ’cause I’m a little older generation, we didn’t really discuss money in the family as far as what our family was doing with their money, so to speak, until much, much, much, much later I had these conversations. That just wasn’t really done, so it wasn’t an integral part of our conversations as a family. So how do you start that process to get it, so hey, have some communication of what’s actually happening here ’cause I guess it’s very, very important. That’s the part we don’t… We kinda miss. It’s extremely important for everybody.
0:09:50.8 Cindy Arledge: Well, it is, and that’s why my goal is to see this legacy planning be seen as its own industry, because you hire experts to write a will, you hire an expert to manage your will, you hire an expert to file your tax returns. Why not hire an expert that can lead you through these conversations? Because it’s extremely hard to do when you’re trying to have these conversations with your children or grandchildren because they’re looking at you like you have an agenda. And the last person that your kids wanna listen to is yourself. [laughter]
0:10:22.8 Kurt Baker: That’s very true. I mean, you’re almost… As you’re talking about this, I’m thinking, well, that’s why I’ll transfer it a little bit, but it’s almost like having a family therapist, so to speak. Because I know that a lot of us go to therapy for one reason or another, because you have that third party having a conversation. Why do we use realtors when we sell real estate? Because there’s a lot of money at stake, and when you have the buyer and the seller talk to each other, things can go wrong, and they find historically, you get more money out of your property when you’re using an intermediary. So all this is documented that it actually helps. So is that kind of what we’re doing? You’re getting that person in there to say, “Hey, I hear your side, I hear your side. Here’s what I’m seeing,” so to speak.
0:11:05.3 Cindy Arledge: Well, and I tell people I am not a therapist because I don’t have to deal with the past because the past keeps showing up in the present, and so it’s very narrow focus of what I do. I actually think about it as like a human capital development program at the family level, because at the business level, we’re investing in our employees to grow their human capital, and when we do that, we know that our businesses are worth more. Well, it’s the same… The same is true at the family level. I’m a human capital development specialist giving those families a structure that is repeatable, because that’s the key in these families that are retaining well to the third generation and on. They have a system that’s repeatable, sustainable, and in that way, if there’s decisions made about the money, it’s not personal.
0:11:57.3 Kurt Baker: That is awesome. We’re gonna take a quick break. And we come back we’re gonna get into just how you setup that structure. You’re listening to Master Your Finances, be right back.
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0:12:07.7 ANNOUNCER: Yeah. You’ve got loads of money but it’s all about how you manage it. Let’s get back to learning how to grow your green with Kurt Baker of Certified Wealth Management and Investment, only on Master Your Finances.
0:12:24.9 Kurt Baker: Welcome back. You’re listen to Master Your Finances. I’m here with Cindy Arledge, and we’re talking about really helping the family do a better job of transferring wealth, because as you point out in the first segment, most families lose their wealth in the third generation. Shirt sleeves to shirt sleeves. You build up the wealth, the second generation kinda enjoys the wealth, the third generation, it just, it goes away at that point, ’cause they really aren’t trained in how to manage wealth and things like that. But we have had people do this very successfully, some of them for hundreds of years, in some cases. Most do not. So what is the difference between those that have been very successful… I don’t recall the name but I think it was a family from Japan, I believe it was. Haven’t they been around for forever? And so they’ve managed to continue their wealth through many, many, many generations. Again, most of us don’t. So what’s the difference and how do we address that?
0:13:19.4 Cindy Arledge: Well, the difference is simply that they just have added an extra plan to their estate planning efforts. I mean, in it’s most simple terms. And the purpose of that plan is to eliminate the known risks, create a culture that each generation has a we over me, and then create these sustainable systems.
0:13:39.5 Cindy Arledge: So the idea that instead of being accidental. Like when you think about my mom and dad, they could be considered accidental wealth creators. I mean, they worked at it really hard. But instead of it being accidental, it’s repeatable. Teaching the next generation how to use their gifts and talents to create their own wealth and become stewards and managers and creators of the wealth. So the structure piece of it is a big piece of it. And my heart was helping entrepreneurs use this system and high net worth families use this system to create well forever.
0:14:22.5 Kurt Baker: No, that’s ideal. That’s ideal. So what are some of the steps you initially take to start this process? ‘Cause it sounds like an awful lot to do. I know some families are, “Well, I haven’t talked to my sister in 20 years. How do you expect us to get together and train each other on how to manage wealth three generations from now?”
0:14:41.6 Cindy Arledge: Right. Well, and that’s why we’re bringing in the expert help. But one of the easiest ways that I’ve helped people understand that this is right for them, is just a checklist, or these are the situations that will cause issues with your family in the future. Just a simple checklist. And if you have these situations in your life, then you can pretty much know that your family may have problems in the future, and that’s eliminating those known risks.
0:15:08.5 Cindy Arledge: So I did a presentation recently, and there’s a family that had 18 check marks. They were a blended family. They own their own business, and they had some family members working in the business. Some family members weren’t working in the business. They didn’t have a will. They already knew that there was some family issues. The list goes… It’s a pretty substantial list, not too bad, but those unaddressed will surely show up at the transfer.
0:15:38.1 Kurt Baker: Oh yeah, that’s interesting, ’cause people think, “Well, if you don’t… ” I know some of you have set up… Like getting ready for inheritance. To like, “Well, I’ll let the kids worry about that.” I hear that a lot. So well… The simple things like who gets the china, as an example, “Well, I’ll let the kids figure that out.” Well, guess what, probably not gonna happen in a clean concise way that you’re thinking it’s gonna happen. Like I say, “Oh, let’s together. Oh, that’s okay. You can have that or you can have that.” No, not usually, right? That’s at least what history show us.
0:16:09.3 Cindy Arledge: Absolutely. Well, and here’s a horror story for you Kurt.
0:16:13.1 Kurt Baker: Oh oh.
0:16:13.2 Cindy Arledge: You could actually, live through a bad estate plan. We had a really close family friend whose wife of 65 years passed away, and their only daughter had passed away. And they were a really tight knit family. And their granddaughter was an attorney. And when grandpa almost died, they made the granddaughter the executor of their estate. Well, when grandma passed away, he was picked up by the California Hospital system and told that he was unable to care for himself.
0:16:41.4 Kurt Baker: What?
0:16:43.3 Cindy Arledge: And in the week that it took him to convince the hospital that he was fine, the granddaughters had cleaned out the house, taken all of grandma’s jewelry, and he had to fight to get his own money back. And he lived another eight years… He was almost 101 when he passed away.
0:16:57.6 Kurt Baker: Oh my word.
0:16:58.1 Cindy Arledge: And outlived his second wife. So you could actually live through a bad estate plan.
0:17:04.6 Kurt Baker: Okay, I don’t think I’d recommend that though.
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0:17:09.6 Cindy Arledge: No. Well, here’s the thing…
0:17:10.8 Kurt Baker: Let’s try not to have that happen.
0:17:10.9 Cindy Arledge: Get a good estate plan so that when you do need help your family is all on the same page.
0:17:16.1 Kurt Baker: Right. Right.
0:17:17.6 Cindy Arledge: Right? It was so shocking when that happened. So the idea of this we over me culture, that’s a real critical piece of that.
0:17:27.1 Kurt Baker: So how do you train that? Because that’s a hard one. So everybody… Unfortunately, that seems to be what happens. People default to WIFM. “What’s in it for me? What am I getting out of this?” And a lot of times, other generation say, “Well, that’s… I’m entitled to this money.” I’m entitled to this. I’m entitled to that. I go, “Well, your parents or your grandparents, they’re the ones that created this. The fact you happened to be there is not really an entitlement.” At least that’s my personal view. It’s like, “Okay, it’s great, but I didn’t get entitled to anything. I didn’t earn it. They did. They can do what they want to with it.” So how do you kinda get over that kind of mentality about how different people view that wealth that may be coming down the pike.
0:18:09.4 Cindy Arledge: We’ve got three different plans that we work with families. We have a family conflict resolution plan. Because oftentimes, conflict can either destroy your family or it can actually make it better. So when a family defines how they’re going to resolve their conflict within their family… I’m talking about a formal resolution plan. Everybody agrees to it. And that’s the big… The big piece of legacy planning that’s different is that instead of planning around the family you’re actually planning with the family. And so that happens in regular meetings.
0:18:44.2 Cindy Arledge: So my family, we’ve been doing legacy planning for 10 years now. I have two daughters and a step-daughter. We’re up to five grandkids. And so we meet on a regular basis and we have an agenda and we know what we’re gonna talk about. And the other piece of this is we have a family harmony plan. And our family harmony plan includes a week-long legacy week vacation that my husband and I take the entire family on vacation every year from the second Saturday to the third Saturday in June. And we pay for most of the trip. But we turn the budget over to the three girls. And they’re learning how to make decisions about money in a fun way, and learn how to get along in a fun way, now, while we’re alive. And so that legacy week, the magic really happens at the cousin level. So by taking these… They’re now 12-4, every year they spend this week together, they’re creating shared memories of time spent. And then the other piece of this is a family development plan that my husband and I have made a list of things that we feel like the girls need to have mastered.
0:19:56.6 Cindy Arledge: And one girl may need to learn communication skills, another one may need to learn money management skills. We actually invest in their development with other outside specialists to teach ’em that information. And then they have things that they wanna learn and they wanna know. So the big piece of it is investing in your family while you’re alive.
0:20:15.1 Kurt Baker: Yeah, you’re kinda getting down to something I think we criticized our educational system, sometimes. We don’t really teach money management through school. I know when I was in elementary, middle high school, none of that was taught any of my education. And the other, which is… That you just point out was communication, one of the leading indicators of somebody that’s successful is having good communication skills, whether it’s verbal, written. Family should have good communication skills but many, many times… We’ve had wars start over mis-communications, so it’s kind of like if you’re not communicating properly, then that’s bad too. So how do you start that process of getting ready that… ‘Cause the younger you start, I assume the better.
0:20:55.8 Cindy Arledge: No, absolutely, and we actually… Another piece of this, I’m gonna take a left-hand turn with you here, we actually have a team of people that we call our board of directors or virtual family office. We will host a seminar for the family and have our experts come in and train them, and so now you’re building a relationship with your advisors, your brain trust, and they’re providing that information to your family and everybody’s receiving the same information at the same time. And so it really is a great way to increase that human capital development at the family level. And the other thing about this is preparing them for their future roles. So many families have asked a child to be their executor or back-up executor to a spouse or a trustee. Well, where do they get the training for that?
0:21:50.1 Cindy Arledge: And so we provide that training for those future roles while everybody’s alive. And then the third piece of this participation we over me culture, is to create a purpose for your wealth that’s bigger than the family, because then you’re not so entitled. The family has… I used to do values-based, but I’ve actually changed that to working with convictions with the family, what is the family convicted about making the world a better place, and then everybody can use all their various values to impact the world as a family, and that’s really one of the key pieces of doing away with that entitlement piece.
0:22:32.2 Kurt Baker: Well, that sounds really awesome. So how do you start that process? Because families could be very large, and it’s… If you get more than a couple of people in a room, it’s hard to get everybody to come to the same decision. We’re all gonna disagree at some level. So I’m just seeing a couple of things here, how do we get them together? And how do we start that process?
0:22:52.3 Cindy Arledge: Well, and let’s even talk about June, 2020, families couldn’t even get together at all, right?
0:22:56.9 Kurt Baker: Right, right.
0:23:00.8 Cindy Arledge: So we just, we chunk it down into tiny, little bits that we just make baby steps forward. Rome wasn’t built in a day. And we try to make it as fun as possible, and so we can do by Zoom meetings, we can do it monthly meetings, we can do it annual meetings, it’s just whatever works for the family is what we work with.
0:23:20.6 Kurt Baker: Well, that’s awesome. We’re gonna take another quick break now. You’re listening to Master Your Finances.
0:23:25.7 ANNOUNCER: We’re not just doing this for money, we’re doing it for a shit load of money.
0:23:30.6 ANNOUNCER: If you want to learn how to make and manage that kind of money, turn the volume up as we get back to Master Your Finances with Kurt Baker of Certified Wealth Management & Investment.
0:23:42.9 Kurt Baker: Welcome back. You’re listening to Master Your Finances. I’m here with Cindy Arledge, and we’re talking about really getting families to have a long-term success with their wealth, not just the family, the first generation that earns that wealth, we hear all these stories, most of the people are very wealthy now, earned it themselves in this particular generation. Elon Musk did it, Bill Gates did it, all these people, you hear about, Steve Jobs, many of them made a lot. But now the question is, what happens next? And one of the things that comes to my mind is that families are extremely diverse. You may have a small family, but you may… You could have 10, 20, 30, 50 even more people involved sometimes when you’re talking about some of these larger families.
0:24:28.4 Kurt Baker: How do we get them all together to buy into this plan and participate the way we hope they will for the benefit of everyone? We know it benefits everyone, but some maybe say like, “I’m not interested, I’m too busy.” Whatever the case may. There’s gonna be excuses. So how do you work through those objections and then get people to come together for a common goal?
0:24:51.1 Cindy Arledge: Well, that’s a great question, and it’s got various answers to different pieces of what you just asked me. So when I am engaged by a family, the first thing that I do is lay that foundation with the founders, because they need to know where they want their wealth and how they want it to affect the family. So I work with them first and we have an initial family meeting. And that’s where the process starts where you invite the rest of the family in to participate. And some families… Not everybody’s gonna get invited. There are some families that have some issues, and so you start with the ones that will show up. And then for us, on our harmony plan, which is the fun plan, they know that every year we’re gonna go on this vacation, and if something is in their lives and they can’t come that year, they know that they’re gonna be invited the next year. But we try to make it so much fun that they don’t wanna miss it.
0:25:50.3 Kurt Baker: Wow.
0:25:51.8 Cindy Arledge: Like this year, we took 13 people zip-lining, horse back riding, and just doing really fun stuff. So it’s like their week to come together, we rent this huge house, we have fun, and they’re really different. Our girls are very different. So it’s show… First of all, on the harmony side of it, who’s gonna show up and don’t force it, but make it so irresistible that they want to. Later on, when you get your structure set up, that’s where this governance planning really comes in because it doesn’t require the entire family. Once you get your… That board of directors of that brain trust together and you create a… We help families create a family constitution. Well, then they can start setting up councils and they can send representatives from their family branch to come to the meetings. And then a big piece of this is communication. So for my husband and I, I write my daughters a monthly letter every month, and it’s just a little bit of wisdom that I want them to know, and then I keep it together in a big book. And this year, twice this year, what I was gonna write was changed by current events. And I pictured myself or I pictured my family 100 years from now, finding this legacy book of these monthly letters, and thinking, “I didn’t even know our family lived through that.”
0:27:17.3 Cindy Arledge: And I will tell you one of the events that happened to us is that Uvalde shooting of the children in the school. And so what I was gonna write that month ended up changing because I wanted to share what I was thinking about that with my daughters, and again, thinking of future generations. I hope some day that… There’s people that aren’t even aware that people used to go in and shoot at schools. Like, “Oh my god, that really happened?” You know what I’m saying? “That would never happen in 100 years.” And so to have that first-hand experience of what we lived through in that experience is pretty… It gives you the why behind taking the actions.
0:28:00.3 Kurt Baker: So it’s like a family historian type thing, you’re really kind of tracking things as they’re happening, based on what’s going on at the time and how that’s important.
0:28:08.2 Cindy Arledge: Exactly.
0:28:08.9 Kurt Baker: That way, 100 years from now, the family could look back and see, “Why do we do the things the way we’re doing them now?” You can go back to like… Really, you’re delving into the wealth of knowledge that you have multi-generational knowledge now. So you’re adding this all together and then the following generations will hopefully benefit from it, ’cause sometimes the knowledge is lost because it isn’t transferred along.
0:28:30.8 Cindy Arledge: Exactly.
0:28:31.7 Kurt Baker: We don’t sit around the campfires like maybe some of the cultures used to do and then the elders talk to the younger ones, they talk… There was this conversation that went on all the time between multiple generations to pass it, because they didn’t have writing, they didn’t have a lot of other ways to do it, so they had to do it that way. We’re getting back to a little bit of that now, ’cause people just assume you can just learn all this. You’ve got Google, you can learn anything you wanna learn. But not about the family. Not how it actually fits.
0:28:57.5 Cindy Arledge: Well, and every family has their own way of doing things. One family, I don’t know if you’ve ever heard of Missy Purdue, but she’s been 14 generations on the Sheridan side and married in the Purdue side, they’ve got multiple generations of having this wealth. And in their family, everyone’s expected to write their own biography when they’re 60.
0:29:16.9 Kurt Baker: Oh, wow.
0:29:18.2 Cindy Arledge: And so now they’ve got this whole bookshelf of previous family members that have written their own biography. Another family takes a family photo at Thanksgiving and puts it up in the hallway, and when the youngest son’s wife got to come to Thanksgiving for the first time, she went down the hallway, looking at the pictures, and she said, “Well, how come you never had a date for Thanksgiving?” And he said, “Because I watched my brothers bring dates and they get married and then their wives ask, “Well, who was that? Who was that? Who was that?” And so even having a simple tradition of having family photos can alter behavior. So every family is different. And I help them find out how to pass that character and values and convictions from one generation to the next in the most meaningful way.
0:30:05.6 Kurt Baker: You just mentioned getting married, so that brings out another aspect. So you can have the family involved, but now somebody gets married and you’re bringing a new spouse who has not been necessarily trained in what’s going on, so you’ve gotta bring him or her in at that point it, at some point. And that’s where… I think that’s where tradition might help. This is just the way we do things. I mean, does that kind of help?
0:30:27.7 Cindy Arledge: Well, it does help.
0:30:27.6 Kurt Baker: Yeah.
0:30:27.7 Cindy Arledge: And it strengthens that family value where they don’t bring the wrong person home. [chuckle]
0:30:36.4 Kurt Baker: That’s true, too.
0:30:36.5 Cindy Arledge: One family kinda has this test that they take people that they’re dating, they have to go to the remote ranch and live camping for a week. And if they can’t handle that, then they probably don’t make the cut. You know what I mean? It’s amazing the different ways that families can vet future spouses.
0:30:55.1 Kurt Baker: Oh, so we’re actually getting a selection. [chuckle] But that’s very interesting because you’re teaching communication, now you’re teaching how to pick a spouse as part of this because that’s part of the success. More than half of the marriages that have been divorced, correct? So if you’re a little bit better at picking somebody that fits into yourself and your family atmosphere, then you’re probably gonna be happier, they’re gonna be happier too, for frankly. Everybody’s gonna a little bit happier if it all matches.
0:31:19.2 Cindy Arledge: Well, and to your point, it’s because we do the ground work and the legacy plan that people know what they know. And it’s okay to be who you are, inside the family, when you build the structure right and there’s room for everybody. But you’re still going towards that common goal of making the world a better place.
0:31:41.9 Kurt Baker: That’s awesome. So we get everybody participating, you set up that structure, so how do you decide what the… It sounds almost like a family mission, multi-generational family mission, like why does our family exist? How do we wanna impact the world 100 years from now? What do we want our footprint to be out here?
0:32:01.4 Cindy Arledge: Yeah. I actually have a giving exercise that I work through with the family. And so that everybody has a voice, we use a nominal group technique, and so the family actually votes on it and everybody has input. I think that’s what really makes the difference, when you add a legacy plan to what you’re doing, the entire families are participating, because without it we’re relying on paperwork to do the talking course after we’re dead and the next generation may or may not wanna take that baton. But when they’re a part of creating it, then they’re much more likely to wanna steward it and not become entitled and make sure that it continues.
0:32:43.4 Kurt Baker: Right, right. So you wanna go to some of the tools that we teach the family, and how to implement this and how to make sure it carries out the way we’re hoping it carries out.
0:32:52.6 Cindy Arledge: Well, one of the tools is that they create a family constitution, almost like a governance document, that’s a great one. Of course, we have the conflict resolution plan. We talk with families about how much do they wanna invest in their family. And some families actually set up permanent funding so that the wealth just creates itself to pay for their legacy planning so it’s ongoing. And then, they have the epic family mission. Lots of families will just create a place mat at the dinner table so that it’s right there in their face and it’s about… And I will tell you, for our family, we have all our family pictures from our trips. So when the grandkids come spend the night with me, they see the progression of the family. Really, there’s unlimited tools that we can use to meet the family’s needs. We know where we’re going and we can create unique tools to get there.
0:33:51.2 Kurt Baker: Well, that is really awesome. So one of the things I know, and we’re gonna have to take a break here in a minute, but one of the things that maybe we need to address after the break is, the thing that I’m concerned about is when you have a wealthy family, how do you bring up children with family values that they wanna work? Because if you have all this wealth and literally you don’t work for anything, you can survive, you don’t need to necessarily work, but it’s good for our souls, it’s good for our personal development to do something. You can’t just sit home and watch Netflix all day. So when we come back, you wanna help us out with how we set up those family values and make sure everybody is productive and not just well off when we come back. You’re listening to Master Your Finances.
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0:34:30.9 ANNOUNCER: Do you want to prevent this from happening to you? And it’s God. It’s all God. Listen closely as we now return to Master Your Finances with Kurt Baker of Certified Wealth Management & Investment.
0:34:45.8 Kurt Baker: Welcome back. You’re listening to Master Your Finance. I’m here with Cindy Arledge. And we’re talking about really kind of sustaining the family wealth over multiple generations, but not just the wealth as far as the monetary end of it goes, but also as far as core values. ‘Cause really wealth comes from core values. It comes from how productive you are. That’s the result of being productive. Some people mix it up. You need money to make money. Well, you really need to be productive. If you’re productive and you add value, the money will come. That’s just what happens. So you have to focus more on that. But one of the concerns I have is, that I know many wealthy families do, is you create this wealth, I want to make sure my children, my grandchildren also know what it’s like to work because it feels good to produce, it feels good to create, it feels good to add value. So how do we make sure that value continues? Because over many, many generations, having money and just sitting around doing nothing and sitting on the beach all day, that’s not a life where you’re gonna actually enjoy it long term. You’re gonna get tired of that. You need to produce, in my view, at least. What do you think?
0:35:51.0 Cindy Arledge: No, absolutely. And so what you’re talking about is actually the foundational piece of what I do. And this legacy planning came about from reading partly a poem when I was in that waiting zone. And it came from the crypt in the abbey… A crypt on a tombstone. And it basically said, “I wanted to change the world, but now here I am laying on my deathbed, and I realize that if I had just changed myself first, and then I had changed my family, then together we might have changed the world.” So everything that I do is an inside out approach. And so we have a portion of this in this preparation piece, this participation piece of helping every generation become their own wealth builder. And so in the foundation piece of change yourself first, we actually have a emergency preparation plan for the family.
0:36:54.9 Cindy Arledge: And it’s almost like a first responders plan. If something happens, the family has the resources to take care of the medical emergency. It’s about making advance decisions and everybody knows what their role is. So that’s a piece of it. The next piece of it is, remember you must die, memento mori.
0:37:14.3 Kurt Baker: That is true.
0:37:16.8 Cindy Arledge: It’s about living with no regrets. And I have a series of exercises that I’ve created to help families go through these really hard discussions. Nobody wants to talk about death, especially with COVID and all that. But when we live with the end in mind, it actually leads to our best life. And so in this foundation piece, we talk about personal legacy and we talk about being authentic, and then we talk about living with no regrets. Well, when the family members are old enough, I take every family member through this foundation piece to help every single adult discover what is their zone of genius? What is their authenticity? And then the last piece of this is living by design. And this came from just the pain that I went through after my mom and dad passed away and the loss of relationships, is really understanding what does it mean to be human? We truly are spiritual beings living in a physical world as feeling creatures who think. And if you want me to, I’m gonna repeat that because this is like the heart of what we do. We are spiritual beings who are living in a physical world as feeling creatures who think. So much of the plans that are based around this planning that we do is on the thinking level, the physical level. But this legacy planning is really a heart-centered spirit-lived plan that we put together.
0:38:48.2 Cindy Arledge: And so when we take the family members through this, we talk about just universal laws. And this is where this idea of… I don’t have to be a therapist, but I can help the family develop what I call a formula for living. Like what does this family believe to be true? And one of the… And I read constantly, and I’m always bringing in ideas that I learned, and one of the things that gets us in trouble is that when we lose a loved one, we’re in loss and grief. So there was an author, Jill Bolte Taylor, that actually had a stroke that shut down half her brain, and in doing so, she experienced nirvana. She couldn’t even separate herself from the shower water. And then she recovered from that, and it just so happens that she’s a brain scientist. And when she gave her speech, “My Stroke Of Insight,” people wanted to know, “How do I experience that nirvana that you experienced without having a stroke and shutting down half my brain?” And so she’s like, “Well, I don’t know.” So she spent the next five years figuring out how the brain works and how to experience that nirvana.
0:40:04.3 Cindy Arledge: And so one of the things that she was able to identify is that we have four characters in our brain, and one of those characters is the 5-year-old child that’s afraid of everything. Well, what happens is that when we have a loss in the family, the people that are showing up to settle that estate are in the right side of their brain in that 5-year-old, “This is mine, I’m not safe.” So by helping families understand in advance, “This is the way your brain works,” and how to access that sign and recognize what character of your brain you’re using, then they can identify and not stay in that character too when they’re settling and they’re in stress. So that’s just a piece of what I do.
0:40:45.1 Cindy Arledge: And then helping every generation decide how they’re gonna become a wealth builder, and then using the constitution and then a governance plan that the family agrees how they’re gonna use their wealth. One of the families that I’m familiar with here in the Dallas area, they said, “We don’t wanna create this wealth and not let people use it, but we don’t want them to become entitled.” So they’ve created rules around their wealth that, “We’re not gonna ever use any of the principle. We’re gonna give this much, but everybody is expected to create their own.” And so you work together to create those rules in advance.
0:41:23.6 Kurt Baker: So how does that part work? Because if I have this wealth that’s created and we’re living off the return, so to speak, on the corpus of the wealth, what’s my incentive to go out and create my own if I’m getting these checks from the family coffer, so to speak? Because I need to… I should be producing. So how does that dynamic work?
0:41:45.9 Cindy Arledge: Yeah. And so every family does it different, and so there’s some measurement tools that they have. And you can’t plan for the 1% that doesn’t work. You have to plan for the 99% that does. And some families have an exit plan that if you don’t wanna participate in the councils and you don’t wanna participate, there’s an exit plan for them. And so you may always have that 1% that’s gonna lower their lifestyle where they don’t have to work, but at the end of the day, we have to give people free will.
0:42:24.9 Kurt Baker: Oh, no, I agree. That’s kinda what I’m getting to ’cause… Well, some people, you got everything where people don’t wanna work and people that can’t. They may be physically or mentally disabled and they literally have to be cared for by the family, so I’m sure that’s addressed, right?
0:42:36.1 Cindy Arledge: Right.
0:42:36.1 Kurt Baker: I mean, most plans address that.
0:42:37.2 Cindy Arledge: Absolutely. Yeah, absolutely.
0:42:39.2 Kurt Baker: But if somebody’s like, “I don’t like the way this works,” so they… It almost sounds like you buy them out or they get a… They go, “Okay, well, here. Go on your merry way.” And that’s it. [chuckle]
0:42:50.2 Cindy Arledge: Yeah. No, every family is different, but we try to account for as much of those in advance as we can, and then when it’s in writing and everybody knows what it is, then they can either agree to it or not. What we’re talking about here is shared assets that you have the economy of scale and some families decide that it’s not worth it, and they just separate the assets and go their own way. And to your point, there’s changes in people. You may have somebody that becomes addicted to drugs, you may have somebody who is in a domestic violence situation. So you just try to account for those situations and know what the plan is going to be in advance so that it’s, again, not personal. It’s like, “Okay, if you wanna live off the checks, then this is your choices,” but it’s known in advance. It’s not like, “Well, Jimmy just bought… ” It’s not about Jimmy, it’s about, “Here’s our constitution, here’s what we’ve agreed to, and these are the consequences of the actions.”
0:43:56.1 Kurt Baker: Yeah, that is pretty amazing, ’cause most of that is, one, is not addressed, and two, if it is addressed, it’s a verbal understanding like, “Hey, I’ll do this if you do that,” kind of thing. “You’re gonna take care of mom when she gets older,” or, “You’re gonna do this.” But nothing is actually documented. And I’m assuming this can be updated over time because if you’re talking multiple generations, then what they get to… This almost sounds like you’re setting up a government for the family. You’re setting…
0:44:21.1 Cindy Arledge: That’s exactly right.
0:44:21.2 Kurt Baker: Basically a mini government.
0:44:22.2 Cindy Arledge: And they have to be flexible.
0:44:24.1 Kurt Baker: Right.
0:44:24.2 Cindy Arledge: Yeah. Yeah, you’re exactly right. You’re getting me all excited. And it has to be flexible and adaptable. Because who could have ever… We could have never predicted 2020.
0:44:35.7 Kurt Baker: That is very true. So it has to account for the unknown, so to speak. But I think that gets back to the core value end of it. So if you handle the core values and you know where you’re coming from handling the different events that are gonna happen, it all emanates from that core value strategy, that you wanna sustain this long-term.
0:44:55.6 Cindy Arledge: And I can even give you an example of our family before we have to leave. We are a member of the Conscious Capitalism Movement of that it’s good to make wealth and that it should serve a higher purpose, and I also run commercial real estate and investments in commercial real estate. And the first people knocking on my door for a discount were my big corporations when COVID hit. And so because we serve a higher purpose, we knew that we wanted to help all of our tenants stay in business. And so we set up a plan and every single one of our tenants made it through COVID because we made concessions on rent and helped them stay in business.
0:45:41.6 Kurt Baker: Well, that is awesome, Cindy. Thank you so much. There’s so much information here, but… That communication is key. Getting the family all on the right page, all the same page as far as how you’re gonna handle things and being flexible about it and really building the family core values that could be multiple generational wealth and just continue on and on and on is fantastic. Thanks again for coming on. I appreciate it very much. You’re listening to Master Your Finances.
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0:46:07.7 ANNOUNCER: That’s all for today’s episode of Master Your Finances. Miss Kurt Baker’s biggest money managing tip or even a full episode? Head on over to masteryourfinances.us or 1077thebronc.com/masteryourfinances. Look for Master Your Finances on Anchor, Spotify, or anywhere you get your podcasts. We’ll see you next time only on 107.7.
