Real Property, Trust and Estate Law Journal

A Wil(l)ful Legacy: The Necessity of Including Intangible Assets in a 21st Century Estate Plan

by Dalton Barfield

Editor’s Synopsis: In this Article, the author explores and offers a solution to the estate planning dilemma of “shirtsleeves to shirtsleeves in three generations,” in which approximately 90% of inheritances and family-owned businesses do not survive beyond three generations. The author advocates for the use of “legacy planning” to increase the survival odds of inheritances, family-owned businesses, and inter-generational relationships. Legacy planning—the inclusion of intangible assets in an estate plan—encourages family members to determine and discuss the values behind their wealth or business. When the creators of wealth and businesses explain the meaning of their tangible assets to the individuals chosen to inherit them, the inheritance becomes a legacy.

I. Introduction

Shirtsleeves to shirtsleeves in three generations. The first generation builds it, the second generation spends it, and the third generation blows it.1 In the disposition of personal wealth or the succession of a family-owned business, probability does not favor the preservation of assets beyond the life of the creator of that wealth or business. Approximately 30% of family-owned businesses last into the second generation, while only 12% survive to the third generation.2 Similarly, personal wealth does not outlive the second generation in 70% of inheritances, and 90% of inheritances do not outlast the third generation.3 Clearly, the current system of intergenerational inheritance does not work to preserve personal wealth.

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