Family Investment Planning; An Introduction

Many people do not take a long term view of their finances. Developing a sound plan to secure one’s family financial future may probably have been lost in the crush of kids and career. This becomes the beginning of future finance-related problems that may strain relationships and could become disastrous hence, the need for family investment planning (“FIP”).

FIP is a form of wealth creation that can survive the present generation if correctly established thereby securing the future of your loved ones and favourite organisations. It has been used by numerous renowned families to provide future generations with financial leverage in their pursuit in life. One of these renowned families is the Kennedy family.

The Kennedys’ Story
It was always Joe Kennedy’s emphatic wish that money never be discussed either at the family’s dinner table or in public. “It’s just not an important enough matter to talk over,” he would say. Long before Joe’s death, plans had been completed for the management of his family’s holdings for future generations. The closely guarded secrets of the Kennedys’ finances will remain in the hands of a small group of totally discreet professional managers operating from Suite 3021 in Manhattan’s Pan Am Building. The aim is to consolidate what the tragedy-scarred family possess and preserve a base for the rising generations of Kennedys.

Overcoming Finance Issues
As early as 1926, Joe Kennedy set up a Trust Fund for Rose and the children then born. Another was created in 1936 and yet another in 1949. The 1949 Trust Fund was the vehicle through which Kennedy settled portions of his wealth on his 28 grandchildren. The three Trust Funds and the Joseph P. Kennedy Jr. Foundation were the chief instruments of capital conservation for the Kennedys.

At the end of 1968, the Foundation had assets of about $22.1 million and had disbursed about $1.6 million almost entirely for research in mental retardation.

When John F. Kennedy became President, it was disclosed that his personal holding under the family trust funds was $10 million. The $500,000 gross (after taxes) gave him slightly over $100,000 a year to spend. By his 45th birthday, the President had received one-half of the principal held in trust for him with the remaining half under the discretionary control of the Trustees.

How The Kennedy’s Made The Feat
Joe Kennedy understood the importance of FIP, which led him to create Family Trusts. Like the Boston Yankee from whom he learned so much, Joe Kennedy took precautions when creating Trusts for his children by stipulating that control over the principal should pass at stated age intervals. The strength of Joe Kennedy’s wealth, as he applied it to satisfying his own ambition and that of his children, was its concentration and independence. The Managers and Trustees were bound to spend money cautiously while ensuring that the interests of grandchildren were protected. This made it difficult to plough millions of money into a particular political cause.

Poor Financial Planning
A close friend of Ethel’s (Robert F. Kennedy’s wife), while recalling the “extravagance of the ebullient life” that she. Bob and the children enjoyed, hinted that income and expense ran a neck-and-neck race in her household as in the ordinary American’s. “Income and expense running neck-and-neck” is the order of the day not only in the American families but in most families of the world. However, the success story of the Kennedys can also be yours, and one way of achieving this is by setting up a FAMILY TRUST like the Kennedys did.

To achieve a similar success story, it is important to understand what Family Trust is and certain salient issues relating to it.

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