Week 3 Flashcards
The late Reverend Peter Gomes at Harvard begins by saying “My thesis involves the distinction between making a living and making a life” He goes on to make a strong plea for which of these?
A) Making a good living while doing as little harm as possible
B) Raising a flourishing family
C) Passing on family values
D) Wealth has civic responsibilities, and society has claim on our wealth
D) Wealth has civic responsibilities, and society has claim on our wealth
The Reverend believes that we owe something to others and that with wealth comes civic responsibility. He does not say it is optional, or a client or donor choice. He speaks as if it were a responsibility we either accept or shirk. Note how different the tone and flavor are from the Grubman piece. People really do disagree as to whether “giving back” is a personal choice or a civic responsibility. People are raised differently, too. So, what do you think? And how will you raise the subject with clients and donors? Charlie Collier uses this question “Do you feel you have a responsibility to society?” He asks, he does not tell, then he gives them his book and lets them read Rev. Gomes’s remarks. This is subtle, and tactful, of Charlie, but you can see where he stands.
The questions Collier highlights as important throughout his book can be described using all the following words, EXCEPT
A) Probing
B) Open-ended
C) Analytical
D) Profound
C) Analytical
The questions Collier asks are drawn from the liberal arts and from his training in family psychology and in theology. The arey “big picture” questions about quality of life. They are not detailed, factual questions, such as would be found on a client fact-finder in a law office or planning firm. These are, in Fithian’s terms, “above-the-line issues” that Collier explores.
With respect to giving by men and women, which statement or statements below is (are) true?
I. In 90% of households, women are the primary or equal decision-maker.
II. Women are more likely than are men to have a giving plan or budget
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C) Both I and II
What is Collier getting at, when he suggests that heirs need a “mentor-like relationship with trustees?”
I. Trustees, like parents themselves, should try and coach and elevate heirs.
II. Trustees should have the human skills to work with an heir so that the heir actually develops as a human being.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C. Both I and II
Mentoring heirs in the roles they will play in life, including the role of the trust beneficiary, is a key theme in Collier and, indeed, in this course as a whole.
At several points, Collier illuminates a “productive tension” as he calls it, between a child’s need to find a shared dream, a common destiny, a shared moral identity, with others in the family and that child’s need to strike out on their own hero’s journey, pursuing their own conception of happiness. Assume that a giving father is autocratic and controlling. Assume that he owns a business and wants his daughter to join it. She, on the other hand, is a gifted painter. He says to her that if she pursues her “airy fairy” painting, then she will not get one dime from him. Which of the questions below might a trusted advisor ask the father to prevent family tragedy?
I. Shall we write that into the trust?
II. What would you do, as an independent person yourself, if you were she and faced with that ultimatum?
A) I only
B) II only
C) Both I and II
D) Neither I nor II
B) II only
The trusted advisor role requires helping the client or donor come to the best possible understanding. At times, this may mean gently nudging the client or donor to reconsider snap judgement or even deeply rooted biases.
Marjorie Stephens JD believes which of these can help individuals find their motivation?
I. Encouraging Autonomy and Mastery
II. Incentive Trusts
A) I only
B) II only
C) Both I and II
D) Neither I nor II
A) I only
yes, parents should encourage autonomy and mastery. Marjorie believes Incentive Trust actually demotivates beneficiaries.
Lee Hausner, Ph. D. believes all of these are best practices as part of good financial parenting, EXCEPT:
A) Avoid money issues until age 12 or so
B) Allow children to make mistakes
C) Provide mentors
D) Set a good example
All are true, other than postponing money education until adolescence. It should happen starting as early as possible.
Kristen Keffeler believes good financial parenting includes which of these:
I. Parenting for Mastery
II. Parenting for Autonomy
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C) Both I and II
Both are true. Successful Financial Parenting includes these as well as Parenting for Close Positive Relationships and Fundamental Character Strengths, and Grit.
Parenting for Mastery Parenting for Autonomy Parenting for Close Positive Relationships Fundamental Character Strengths Grit
In the Socratic method, well demonstrated by Collier, the questioner elicits the client’s better self by opening lines of thought and letting the client complete them in their own way. After asking “How wealthy do you want your children to be?” what would be Collier’s next move? What will likely be the next thing out of his mouth?
A) He will listen and then correct any misunderstandings the client may have.
B) He will listen for an opening and then make his proposal or case statement.
C) He will listen, hear, understand, empathize, and, most likely, ask another question related to what the client has said.
D) He will go on to the next question on his list or fact-finder.
C) He will listen, hear, understand, empathize, and, most likely, ask another question related to what the client has said.
The Socratic method is like a chess game. The questioner make a move. The other person makes a move. The questioner asks another question. The question asked depends on the answer the other person gave to the first question. The method depends crucially on listening to what the client says and what the client does not quite say. Every question builds not on the earlier question alone, but on the answers being given by the client and on the picture that begins to emerge from those answers. The fact-finder approach and the sales talk approach, or the case statement followed by ask, are all completely different from the Socratic approach. In sales, planning, and in gift solicitation, the process is linear. In Socratic conversation, the client can go anywhere and the advisor follows, asking more questions. If the client returns to the advisor’s own central concerns, it is because the client shares them. Socratic conversation feels risky to advisors and fundraisers because they cannot predict or control the short-term outcomes and because they must think fast on their feet, as the conversation goes all over the place. Yet, Socratic conversation works because it connects the client’s or donor’s own thoughts, feelings, and convictions to the process and helps the client or donor take ownership of the conclusions. In Socratic conversation, the questioner helps the client see the underlying logic of the client’s own beliefs. Socrates likened this to helping a woman give birth to what was already in her.
The late Reverend Gomes of Harvard, cited in Collier says:
“How do I strike a balance between what is good for me and my family and what is good for society? Building family and building society go together. Money is a means to and end, morally neutral but with public consequences.”
What would be a good way to raise such issues with a wealthy client or donor, without provoking controversy and pushback?
I. Ask probing question, such as “Do you believe you have a responsibility to society?”
II. Give the donor or client a book or a reading that raises these larger issues, and let the donor client reach their own reflective conclusions.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C) Both I and II
Both are good practices. Telling a client what his or her moral responsibilities are will shorten the interview and end a relationship. On the other hand, these questions point to real issues. (Is care for other optional?) Not to raise them at all may be to deprive the donor or client of an opportunity to reflect and to reach a considered conclusion. Peter Gomes would maybe consider this too gentle. He would say that the moral responsibility is real and has been acknowledged by ethical thinkers and religious traditions for thousands of years. But he has the pulpit and the robes of the clergy. We do not. Charlie’s own Socratic questions are an excellent, gracious, and tactful approach, and his book makes a good gift.
Of these questions, Collier, Senior Philanthropic Advisor at Harvard, asks all, EXCEPT
A) What is an appropriate financial inheritance for children?
B) What has Harvard meant to you?
C) What principles will guide your decisions about estate allocation?
D) What has been your experience of working together as a family?
B) What has Harvard meant to you?
Note that although Collier does work for Harvard, he downplays the case statement and the “ask.” His book is full of case studies of Harvard families and their large and fulfilling gifts, but he goes out of his way to avoid appearing to be a fundraiser “pitching” a gift. He wants to come across as, and actually he functions as, a consultant who works for Harvard but is centered on the well-being and ideals of the donor and the donor’s family.
Marie is one of three sisters whose parents set up a trust for their financial security. The sisters are fed up with the trustee and the trust company, and would like to move the trust to another bank. Which provision or provisions below would be helpful to them in getting the trust moved, if it is found in the trust?
I. HEMS
II. Decanting
A) I only
B) II only
C) Both I and II
D) Neither I nor II
B) II Only
Decanting provisions do address that.
Not mentioned in this question, but also helpful, would be a “trust protector” who can intervene between the trustee and the beneficiaries, to protect the beneficiaries’ interest.
HEMS - Health, Education, Maintenance, and Support. But does not address moving the trust.
Incentive trusts use which of these:
I. Incentive Provision
II. Skill Development
A) I only
B) II only
C) Both I and II
D) Neither I nor II
A) I only
Only the first is true. Incentive Trusts generally are not oriented to developing skills in a given area.
“The law of unintended consequences.” With respect to multi-generational planning, which example or examples below illustrate(s) that law with respect to trusts?
I. Client asks for a tax minimization, protection of assets, and a secure income for life for heirs. Advisor puts in place a trust that meets these goals. Heirs decide never to work and frequently complain that the trust is more a curse than a blessing.
II. Client asks that her heir be set up for life in a way that discourages him from leading an unprotective life. The advisor sets up a trust that makes distributions to cover health, education, maintenance, and support. Under “maintenance,” the trust is instructed to pay of the heir’s wedding. The heir marries and divorces his wife every year, in order to have a lavish party at a destination resort.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C) Both I and II
It may be obvious that the answer is “both.” The client in both cases had the best of intentions, and the advisor created a tool that fit what the client requested. Yet, the law of unintended consequences was fully in effect. The opposite of what the parent wanted was the unintended result of what appeared to be excellent planning. To see how things can go wrong, to see it like a script unfolding, perhaps a comedy in the making, perhaps a farce in the making, perhaps a tragedy in the making, is to exercise an educated, moral imagination. That is the gift that a trusted advisor like Jay Huges brings to the client’s planning table.
“Operation successful, but patient died.” Let us say your client or donor has a perfect estate plan in which no estate taxes are paid, even though tens or hundreds of millions of dollars transfer to their heirs. Yet, a generation later, the heirs are miserable, most of the money has been wasted, and a third generation is back to “shirtsleeves,” with no inheritance. From this observation, the authors in this assignment draw all of the following conclusion, EXCEPT:
A) Plans on paper matter, but so does how well those plans are executed over the generations.
B) How plans are executed will depend on how well heirs are mentored, educated, parented, coached, and trained.
C) Family governance, including family council, family fund, or bank, and a formal process of developing procedures and practices drawn from family vision and principles are all important, as important as tax planning.
D) Addressing human issues is inappropriate on the planning team, since these issues are personal and private and do not often admit of solutions.
D) Addressing human issues is inappropriate on the planning team, since these issues are personal and private and do not often admit of solutions.
Who on the team will address human dynamics? When should the team refer in such a person? What will doing so cost? Will the family be in denial about needing such skills on the team? So, yes, it is appropriate to consider human issues on the planning team, but getting this to work as a practical matter can be a challenge. It comes down to the planning team, the skills represented, and how well the team works together across their diverse disciplines, within a time frame and budget that the client can tolerate.
