Passing along prosperity: Dr. Carey Tucker has created a plan for multigenerational wealth: Tucker is grateful that he can leave a financial legacy for his two daughters and four grandchildren. (Black Wealth Initiative).
His father's gift helped him to graduate from Howard University and Temple University School of Medicine. It also instilled in him the importance of a multigenerational approach to investing. Now 60, Tucker is continuing his father's approach with his own family. Tucker, who is divorced, has two daughters--one of whom is a physician--and four grandchildren. His goal is to provide his offspring with the same boost his father gave him.
Tucker has always invested his money. In fact, he worked with three financial advisors before his portfolio lost $1 million when the technology bubble burst in the late 1990s. That's when he knew he needed to act "I was dissatisfied with the way my account was going, but I was afraid to change," he recalls. "My portfolio was piecemeal, with a stockbroker handling the investments and two lawyers handling other aspects."
Fortuitously, in 2001, while attending the National Medical Association Convention in Nashville, Tennessee, Tucker heard Smith Barney Vice President Anssy Okoebor deliver a speech on investment planning. He ultimately set up a meeting with Okoebor to establish a plan for his retirement. "I wanted to do estate planning, and when I talked to Anssy, he wasn't pushy," he says. They discussed setting up a trust for his children and took a second look at his insurance coverage. The results were immediate. "He's managed my investments to the point where I'm not losing any money."
To follow in the footsteps of his father by implementing
DOFE principle No. 10: to ensure that my wealth is passed on to future generations, Tucker took the following steps:
* PREVENT LOSS OF PRINCIPLE
Since one of the keys to passing on wealth is preventing the loss of your principle investment, Okoebor worked with Tucker to create an investment policy statement that provided a guideline of how the portfolio would combine stocks, bonds, and other fixed-income vehicles to minimize losses. The original portfolio asset allocation of 60% equity and 40% fixed-income investments was changed to 40% equity, 30% fixed income, and 30% cash. The equity portion of the portfolio included a mix of value stocks, large caps, and dividend-paying stocks to produce income and limit risk. Add in the yield from the U.S. Treasury bonds that dominate his fixed-income investments and the overall portfolio, which is valued at $2.7 million, was up 9.3% from October 2001 through April 2003.
With his retirement income more secure and his portfolio performing to his liking, Tucker, who recently retired because of arthritis, is preparing for his second marriage.
* ESTABLISH A TRUST
To reduce estate tax and provide appropriate shelter for his retirement assets, such as his Both IBA and pension plan, Tucker established an irrevocable trust. The trust, which is valued at $1.6 million and is funded by a life insurance policy purchased through The Hartford, is for his daughters and will be made available upon his death. By combining his money-purchase plan and his profit-sharing pension plans, valued at $2 million and each costing $1,500 to administer, Okoebor save Tucker $1,500 in administrative costs.
Okoebor explains, "We realized that he would be able to avoid some taxes and at the same time could create lasting wealth for his grandchildren." Furthermore, he says, more African Americans "are gravitating toward the intergenerational style of investing so that they can provide for their families in the long-term. It preserves their legacy, avoids transfer taxes, and teaches their children how to do the same."
* CREATE EDUCATION ACCOUNTS
To realize his goal of multigenerational investing. Tucker established 529 accounts for his four grandchildren in November 2002. He contributes $10,000 per child. He can continue to contribute to these accounts annually and receive tax benefits, knowing that he is providing for their education.
* FINALIZE A WILL
Since Tucker owns two homes, worth a total of $800,000, he needs a will that clearly spells out how he wants to disperse his noncash assets. And because he is remarrying, he intends to protect his current estate plan, which emphasizes passing wealth on to his children and grandchildren. With the help of his financial advisor and lawyer, he is preparing a prenuptial agreement and setting up a trust with generation-skipping provisions. The proper documents in place and his retirement income assured, he hopes to savor a life filled with fun, tranquility, and contentment.
Declaration Of Financial Empowerment
From this day forward, I declare my vigilant and lifelong commitment to financial empowerment. I pledge the following:
1 To save and invest 10% to 15% of my after-tax income
2 To be a proactive and informed investor
3 To be a disciplined and knowledgeable consumer
4 To measure my personal wealth by net worth, not income
5 To engage in sound budget, credit, and tax management practices
6 To teach business and financial principles to my children
7 To use a portion of my personal wealth to strengthen my community
8 To support the creation and growth of profitable, black-owned enterprises
9 To maximize my earning power through a commitment to career development, technological literacy, and professional excellence
10 To ensure that my wealth is passed on to future generations
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|Date:||Aug 1, 2003|
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