Are You Wealthy or Rich?

There are names that once were once among the richest, but no longer appear on the list.  Rockefeller, Rothschild, Ford, Carnegie, Ludwig, Astor, Hughes, Getty, Mellon, Chase, Gould.  Not to say their heirs are broke but they are not dominant.  Why not?

Enzo Calamo of Vancouver’s Lugen Family Office posted an interesting piece on the subject recently.  You can see it here  Understanding True Wealth Versus Being Rich

“It requires a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times as much wit to keep it.”

Meyer A. Rothschild

Enzo has extensive experience working with the wealthy and in the article he makes the distinction between true wealth and rich in six points:

  1. Human Capacity – Being True To Yourself
  2. Financial Capacity – What You Have
  3. Lifestyle Capacity – Your Choices
  4. Social Capacity – Your Relationships
  5. Spiritual Capacity – The Alignment Of Your Life Purpose With The Greater Good
  6. Business Capacity – The Value of Your Unique Abilities

Read the article to discover the depth to these thoughts.  What we infer is rich can be transmitted to another generation by proper planning and agreements.  Wealth seems to be a deeper subject.

That difference is the basis for many of the problems in wealth transition. Being rich is a number.  Being wealthy is a life.  That distinction has policy effects as you decide to move your wealth to another generation.

Prepare heirs to be wealthy.  Anyone can be rich, just win a lottery.  Having money is not necessarily a win.  The Law of Conservation of Problem says that problems never go away, they merely change their form.  Preparation is a lifelong task and as Meyer Rothschild points out above, very difficult.

Create durable structures.  There is a difference between control and ownership.  Ownership is about rich, control will turn out to be about wealth.  Corporations, trusts and much more will form the ability to allow those with the unique wealth skills to carry on.  The idea is to retain massed financial punch.

Be prepared to distinguish between those with the unique abilities that will operate the wealth as distinguished from those that participate or perhaps contribute other skills to the riches. This can be a near insurmountable problem because as spouses enter the family unit, some of the ideals are misunderstood.  Envy is never an asset.

Taxation grinds down even the greatest of wealth.  Find ways to minimize it, sometimes through structures and sometimes by preparing to pay, decades before the need.  It is difficult to think multi-generation instead of now.  Great wealth properly managed will be there for many generations.  Some effort must apply to the distant future.  The greatest short term growth may deny the ability to hold the wealth together for a long time.

Distinguishing between wealthy and rich may help in formulating a strategic vision that informs your methods.  Do not overlook the value of such a vision when developing your transition plan.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772

This entry was posted in estate plans, Personal Finance, Planning and tagged , , , , , , . Bookmark the permalink.

One Response to Are You Wealthy or Rich?

  1. I appreciate your commitment to us and the industry your comments and posts are more useful to me in my trade as a teaching tool for me and my clients.I saw Enzo Calamo posts on this subject and it makes for an interesting reading.I have since printed it and it will be part of the discussion package when dealing with clients.It is another club in our bag.Thank you very much.Ngibonga kakhulu equivalent in IsiZulu

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s