Wealth Podcast Post

Family Governance with Kent Welborn

George Grombacher September 7, 2023

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Family Governance with Kent Welborn

LifeBlood: We talked about family governance, the importance of knowing your personal values, the challenge of transferring a business across generations, how to deal with feelings of regret one you retire, and some important tax changes to keep in mind, with Kent Welborn, Wealth Advisor and Business Planning Specialist.      

Listen to learn how to make your values and choices echo across generations!

You can learn more about Kent at Welborn-Financial.com, and LinkedIn.

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Our Guests

George Grombacher

Kent Welborn

Episode Transcript

george grombacher 0:02
Ken Welborne is the principal Wealth Management advisor and Business Planning Specialist with Wellborn. Financial, he’s helping wealthy families and business owners meet their sophisticated needs. Welcome to the show, Kent.

Kent Welborn 0:14
Yay. Thanks, George. Appreciate you having me on your show.

george grombacher 0:17
excited to have you on Tulsa, about your personal life’s more about your work and why you do what you do.

Kent Welborn 0:23
Yeah, so personally, my wife and I live in central Phoenix, and we’ve got two dogs got her son Blake, who was five months old. So we’re excited for that new edition. But yeah, so a little bit about Wellborn financial, we are an independent fiduciary firm that provides wealth management and advisory services to closely held business owners and high net worth individuals. So a little bit to unpack there, George Floria so we’re independent, nobody’s telling us what to do. We’re fiduciaries, we are working for our clients, they hire us and we do what they need us to do. Provide it’s legal, ethical, and in their best interest. And the services that we’re providing them, George, are the advisory, which is really that consultative approach to dig in and find out what are the challenges that clients are facing in today’s environment that need to be solved. And then the wealth management side where we’re managing assets for folks. So that’s what we’re doing over here at Wellborn. Financial,

george grombacher 1:28
but you and I met recently and had sort of an introductory phone call last week. And I don’t know that you told me you had a five month old. So congrats there. How was how was that going?

Kent Welborn 1:42
It’s going great. You know, I have no regrets. But you know, at 49 years old, having a five month old sleeplessness is a little tough, but I would not do it any other way. It’s been great to build up a career travel. As I think I told you did a little bit of acting pre COVID days. So it’s been great to do all that stuff. And now transitioning to the new life of being a father.

george grombacher 2:06
Yeah. How, if at all, has your perspective on on your work changed due to the addition? Gosh,

Kent Welborn 2:15
you know, I don’t know if my perspective on work has changed as much as my perspective on life, where I look at my son, and I think this is a man of the future. And I think about how my son is going to go forward in life and make an impact in people’s lives, and will be instilled in him from values and choices is just going to echo and reverberate and for years to come. And that’s really that’s really an awe inspiring feeling to have.

george grombacher 2:54
Terrifying at all. Kip.

Kent Welborn 2:57
Yeah, it is a little scary. But you know, with anything in life, you just kind of roll with the punches, I would say. I guess I would say, George, if there was one thing that was a little bit different professionally is that? Yeah, I don’t sweat the small stuff nearly as much as I used to, you know, that maybe my staff might think differently, but, but I think that I sweat that small stuff just a little bit less these days.

george grombacher 3:26
I certainly appreciate that, as I think that, you know, I’ve got a six and a three year old and a one month old. So yeah, you know, sweat and small stuff? Ain’t nobody got time for that. Yeah. So values and choices. I spend a lot of time thinking about my values and choices. And I think it’s wonderful. When you start thinking about that, it’s a huge responsibility of you know, I’m, I’m the I’m a dad now, and do my best to raise a great kid, great young man and a great future adult and citizen, and the values and choices that we are making are certainly going to have an influence on him.

Kent Welborn 4:08
Yeah, absolutely. I mean, that’s, that’s the name of the game. It’s, there’s that extension of who we are that is reaching out there. And I just think like, you know, I want my kid to make good choices and make great impact in the world. Because at the end of the day, if we leave it just a little bit better, it sounds really cliche, right. But if we leave it a little bit better than how we got here, then I think that’s all that matters, right?

george grombacher 4:33
Yeah, I mean, it’s incremental progress. I’d like to be able to wave a magic wand and change big problems quickly. But it’s more of an evolution that it is a revolution. And I imagine that that’s something that your clients are concerned with, too, even though they can’t necessarily put it into words, maybe some can. And money plays such a huge role in our ability to do that.

Kent Welborn 4:56
It really does. It really does. And I think we kind of touched on this To when we talked the other day on, I’m looking at the future here the next few years and into the next decade, there’s 70 million baby boomers out there. And they have $10 trillion worth of wealth. And about half the small or closely held businesses are owned by those baby boomers. So it’s a real George, that these individuals are going to have to solve. And I think we’ve positioned ourselves very well at Wellborn financially to help them solve that wealth transfer issue, particularly when it comes to those closely held business owners, because a lot of what we’re doing and working with our clients right now, is that exit planning strategy. And we’re really excited to be providing those services to our clients, and just helping them figure out how they’re going to really take something that they’ve put a lot of emotional time and energy in and built up and is, is making an impact in their community, and how that gets monetized and transitioned over to the next generation.

george grombacher 6:04
Does that just happen automatically? No,

Kent Welborn 6:07
doesn’t happen automatically. No, it takes intention. And you know, I heard this, I don’t remember, don’t quote me on this. But I heard a quote that 70% of all business owners, after one year regret selling their business. And I think George, this regret really is founded in a lack of proper planning. And I can’t emphasize that as much as I can’t emphasize it too much that is, and I think whether you’re being a new parent, or whether you’re transitioning of business, I think that there’s a lot to be said about planning ahead of time. So that you’re able to realize your vision and what you want to have happen, versus just kind of low end with things, which is apparently going to flow with things, right. But I think there’s a real value to that planning aspect. And that’s what we’re really helping our clients with, particularly those baby boomers that have those businesses, and they’re just trying to figure out, hey, how do I, who when, how am I going to sell this business? Is it going to be enough to provide financial independence for me and my family and leave a legacy? So that’s the that’s the questions that are top of mind for a lot of folks that we’re working with these days.

george grombacher 7:29
And those are big ones. Yeah, talk about wanting to do right, by your kids? And will I have enough? Will my spouse and I have enough so that we can maintain our lifestyle and do the things that we want to do? Now, nevermind, wrestling with what I’m going to do after I leave the business?

Kent Welborn 7:51
Yeah, absolutely. And, you know, I mean, you’re aware of this, George, where, you know, there’s some tax laws they’re changing to in the next year and a half, we’re going to see an compression of opportunity of wealth transfer. And I think that’s creating a lot of urgency, not think I know that screen love urgency with people to really be able to maximize some of those higher lifetime, gifting exemption limits, for them to be able to kind of compress more their wealth in strategically transferred over to the next generation. So there’s definitely some urgency here to this complex problem and puzzle that we’re solving.

george grombacher 8:38
Not, I wouldn’t expect you to quote, the changes, but just in broad strokes, what are some of the potential changes that could be coming?

Kent Welborn 8:47
Yeah, so right now, what you can do is gift about $13 million during your lifetime or at death. That’s how the law is structured. What’s happening on January 1 2026, is that that amount is scheduled. Unless Congress doesn’t need to do anything differently. That amount is scheduled to drop down to 6 million. So if you think about George, if somebody has a business that’s worth, let’s say, 20 million, they could gift a large portion of that over to the next generation, without any taxes, if they do that now, and not getting too much in the weeds, but there are some ways to even compress that full 20 million through some creative discounting techniques. So it fits within the 13 million. Now, if that isn’t done between now and the end of 2025. The potential outcome could be that if somebody doesn’t give now Starting January 1 2026, that exemption is only 6 million. So if their business is worth 20, or if it appreciates to 25 of the next year and a half, they would only be able to give to the next generation without taxes $6 million of that business. So it’s a huge opportunity for high net worth, and closely held business owners to be able to think through and take advantage of that passing of wealth to the next generation.

george grombacher 10:31
My understanding of the tax code is that it’s, it’s, it’s voluminous, and it invites planning. And with the right amount of time, a lot of planning can take place. But if somebody calls you and says, hey, it’s December of 25, need to get all this done, I’m sure that there are things that you’d be able to do to help but better served to get started sooner rather than later.

Kent Welborn 10:57
Yeah, absolutely. And, you know, this is just one piece of the planning, there’s other pieces as well, too. And to take a truly integrated, coordinated approach to things, I think you do want to give yourself time, you know, being a parent isn’t something that my wife and I just jumped into, right? We kind of thought that through, right? What that would look like. And it’s the same thing with wealth transfer, in that sense that these are people’s babies, right? Their, their their wealth, or net worth their businesses. And so thinking through and planning how you’d want to transfer that over in a way that there is good intention, that’s alignment with your values as a business owner and your choices, and also what you want to do or have for that next generation. I certainly encourage being a forward planner, when it comes to these types of strategies.

george grombacher 11:50
I’m confident that the majority of your clients are are proud Americans and interested in paying their fair share. But it’s wild that one month, you could be passing $13 million to your kids tax free in the next month, 6 million tax free. So you are you are writing a way bigger check to the government than you would need to you can always give them more I think that that’s true. I don’t know that I know of anybody who said, You know what, I don’t think I paid enough. I’d like to give you more. But I think more people would rather hold on to their money and give it to their kids.

Kent Welborn 12:25
Yeah, absolutely. And you know, I sit down and talk with clients, there’s really three people that are going to get your wealth at the end of the day. And maybe I shouldn’t say people, but three places that your wealth is going to go right, George, you’ve got your heirs, charity, and IRS. Those are the three. And so you look at that. And somebody might say, Well, I started from nothing, you know, I baby maybe took 500 bucks in a suitcase and went off to California to start my life and do my thing and started with very little. So I don’t want to rob or take from my child to do that, and have that same opportunity to start from nothing. So that person might say I’m okay with the money going to the IRS. That’s fine. So I think it’s really important to to drill down into what somebody wants to accomplish, because not everybody really wants to avoid paying taxes. Yeah, they might not mind for that matter. So there’s certainly a discovery process. And it’s not rote, and just figuring out what is it that somebody wants to have accomplished? That’s the name of the game.

george grombacher 13:41
I think that that makes that makes less sense to me. Because it’s not obvious. And I appreciate government taxes, or government errors, nonprofit. But there’s so many things you can do. You can imagine it could save it, you can make it happen. You can be very directed and precise in how you want your kids to get money and when and what for and stuff like that. And I wonder how many people actually realize that?

Kent Welborn 14:08
Yeah, I think so. And I think the basis of good estate planning is taking us back to those values and choices of being a parent. And good estate planning allows your values and choices to eco long after you’re here. And sometimes people think well, estate planning is just for really super wealthy, rich people, right? No, it’s not. There’s some basics of estate plan that you want to have such as healthcare, financial directives, just those good pieces and instruments to have to make sure that your wishes are held up. But then also there is that mechanism within a state state planning where those values and choices that you have as a family or even creating a family constitution. To help guide that element of family governance, and having that articulated, where individual family members can see it, and it can guide the decisions of the wealth for future generations. It’s really cool. Because it means that as a father, or as fathers, as you and I are, that through great estate planning, our values can then transcend for, you know, hopefully the next generation maybe more.

george grombacher 15:33
Yeah, amen. Did you watch the show the show succession?

Kent Welborn 15:39
So I caught a good portion of it. My wife watched it all the way through, but I really did love it. It was a good show. Did you see it?

george grombacher 15:51
I didn’t watch. I watched the first season. And I thought this is fine. But I guess the rest of it was amazing. So yeah, watch it. My perception is that there’s very little family governance and no family constitution that probably would have served the family. Well.

Kent Welborn 16:08
Yeah. And, you know, my judgment is that there was a lack of cohesive family values from the beginning. I think that even if there was an attempt to do family governance, it was too late or would have been too late with that family. So I think that’s a really important point, George, it’s, it’s, you just can’t come to the estate planning attorney. And think that what you draft up there is going to change behaviors of your family that have maybe been going on for decades, like in succession. So the work doesn’t start with the estate planning, the estate planning is the in piece to really, it’s almost like a roadmap for the future. But there’s all that pre work of choices and values, shaping those behaviors that I think really have to happen in order for that family governance to have some stickiness.

george grombacher 17:15
Still got to do the messy stuff.

Kent Welborn 17:17
Yeah, that’s right. That’s right. Yeah, for sure.

george grombacher 17:21
You and your wife are gonna sit Blake down and say, listen, here’s. That’s right. Here’s how it’s gonna go. And he’s gonna be like, cool, dad. Sure. Yeah, buddy.

Kent Welborn 17:33
Yeah, yeah. Hey, I told my wife. He’s five months old, but you’re never too young for discipline. Right. So there you go.

george grombacher 17:40
Yeah, totally. Totally. I love it. Well, Ken, thank you so much for coming on. Where can people learn more about you? How can they engage with you?

Kent Welborn 17:48
Absolutely. Wellborn financial.com. Hit us up, reach out to us. Happy to have a conversation with anybody out there and chat with you for a few minutes about what’s important to you and what you’re looking to accomplish. So thanks, George, I appreciate you having me on the show.

george grombacher 18:03
That was a pleasure. If you enjoyed as much as I did show your appreciation and share today’s show with a friend who also appreciates good ideas go to well born financial.com, that’s Wellborn with one L. So w e LBORN financial.com. If you happen to fall directly into that group that we were talking about the 70 million baby boomers, certainly without question sooner rather than later, have a conversation with Ken but even if you are not if you are somebody like me, and Ken who happened to be a Gen X or a millennial that has a family and has a desire to let your values and choices echo through time and through generations, then reach out and have a conversation with him and find out if it’s the right time for you to start doing this kind of planning too. Thanks, Ken. Ken.

Kent Welborn 18:52
Thanks, George. Take care.

george grombacher 18:54
And until next time, remember, do your part by doing your best

Transcribed by https://otter.ai

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