Family Business Audiocast | Episode 23 | Emily Bouchard | Jim Benedict | PNC Private Bank Hawthorn
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About Our Guests:
Emily Bouchard is dedicated to helping clients address the non-financial issues that often accompany estate and succession planning, and combines her expertise with a passion for empowering individuals, couples, and families to navigate complex family dynamics. Emily provides tailored coaching and consulting services and co-facilitates transformative experiences to enhance personal development targeted at women leaders, next-generation beneficiaries, and blended families, encouraging them to tap into their full potential in unique settings. With a specialization in family communication and interpersonal relationships, Emily frequently speaks on blended family dynamics, the successful facilitation of multi-generational family meetings, the engagement of younger generations in philanthropy, and the complex nuances of family business succession.
Jim Benedict is a Certified Public Accountant and Financial Planner with extensive expertise in the financial advice industry, successfully advising clients with net worths ranging from $30 million to $500 million. His specialties encompass a range of financial services, such as cash flow management, asset allocation, tax and estate planning, and risk management planning, and he helps clients with market segmentation, technical issues, strategy, service delivery, competitive offerings, and operations. He has significant experience collaborating with senior leadership in matrix environments and exhibits strong analytical skills alongside the ability to communicate complex concepts effectively. He also has a proven track record of transforming ideas from concepts into tangible outcomes for clients.
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[Transcript]
R. Adam Smith: [Intro] Welcome to the Family Business Audiocast on LinkedIn. I am R. Adam Smith, creator of this audiocast series. As an entrepreneur, investor, founder, investment banker, and board leader the last 25 years, I am fortunate for my many experiences within the family firm industry.
A warm thank you to our live audience on LinkedIn today – and for those listening in the future.
A brief comment on why I created this broadcast: private companies are a passion of mine, having grown up in a family of entrepreneurs, and having engaged for two decades in deals, strategic transformations, investments, and boards, with an array of fascinating family enterprises, family firms, and family offices. I founded this series to offer a useful platform for listeners to hear from veterans, academics, and leaders in the vast family firm ecosystem. Whether you are a family business owner, building, running, or advising a family office, or just expanding your family office activities, I hope these conversations are useful and enlightening. And now, it is time to turn our attention to our [01:00] accomplished guest on today’s episode.
I'm very pleased today to host Emily Bouchard and Jim Benedict from PNC Private Bank. It's great to have you today, Emily, and also you, Jim, as well.
Emily Bouchard: It's wonderful to be here thank you.
Jim Benedict: Thank you.
R. Adam Smith: Yeah, all right. So, I'm going to talk about you guys for a bit. Your illustrious backgrounds deserve some time.
So, first of all, Emily is the leading authority in guiding ultra-high-net-worth families through the intricacies of multi-generational wealth. She is the head of the Institute for Family Business Success at PNC Private Bank Hawthorn, also senior vice president at the firm. She directs family governance and wealth transition strategies, also handles complex family dynamics, especially in blended families. Also, Emily co-authored estate planning for the Blended Family and Beginners Guide to Purposeful Prenups.
Emily is adept at addressing common issues such as [02:00] family business succession, family estate conflicts, also engaging next-gen and philanthropy: super important topic in today's family office world.
Jim Benedict, also senior vice president and also Business Owner Solutions MD at the firm, brings over 30 years of financial expertise to this role working with Emily, where he merges deep analytical skills with strategic client management. Also, Jim specializes in estate planning, as well as business succession and wealth transfer. Jim provides tailored financial strategies for multimillionaire and billionaire business owners and has a comprehensive understanding of the financial services industry.
It's great to have you both today. We're going to jump into a conversation about business succession, family office structure, presale and sale preparation, also post-sale, talking about some experiences you've had together. It's great to have you both today. Why don't we start talking a little bit about some of the [03:00] presale considerations of family businesses?
As you know, the Family Business Audiocast, now in almost our 25th episode, we talk about the family enterprise, the family firm. Some people talk about the business of families, not just the family office. So, let's keep in mind that the audience today and the future is considering the growth and the wealth creation and legacy of not just their single-family company, right? But also their entire family office or multiple holdings.
So, on the presale, let's talk about the considerations that a family will take prior to the sale of a business.
As you know, I run an M&A business, but also I consult private families over time at the board level. And I'd love to hear some of your comments on how you guide your clients up to that point beyond the family, like talking about their C-suite, talking about their governance, their employees, their board.
Maybe, Emily, you can start talking a bit about the presale, and then Jim as well, we'll cover that. [04:00] Then, we'll talk about the actual sale itself.
Emily Bouchard: Yeah, that's great. It's a wonderful place to start. And I will say that I'm thrilled that Jim could join us because everything that you just talked about in terms of a presale, so often there is a focus on an offer's been given, there's a letter of intent that they're ready to sign, and it becomes quite focused on the tactical strategic nature of the sale itself.
And what's great about the Institute for Family Success and what Hawthorn's created with the suite of services is this, let's look at the whole picture and let's look at what the impact of a sale will be on the family way before we sign a letter of intent. So, for instance, I worked with a family that was really wanting to see, do we want to sell? Do we want to keep it in the family? Do the kids want to be a part of it? So, we started having some really important family meetings and building communication strategies so they could really talk about [05:00] what they wanted for the business, for each other, for their individual goals, for the family goals, and what the roles were, the responsibilities, and introduced Jim's counterpart from the Business Owner Solutions to the family as part of that process. What does it look like if we were going to sell? What do we need to be thinking about? How would we structure it if we're not going to sell? Like really taking the time to look at all the what-ifs.
And then they got a request from another company to consider being bought out, and because we had all these things in place, we were able to really guide them and give them some great ways to approach it before they sign the letter of intent. I'd love for Jim to talk a little bit about that, the prework that makes such a difference if you can do it before you make the decision that we're going to be bought by this particular group or company.
Jim Benedict: Yeah, that's a great question, Emily. I think one of the things that makes us unique is that I focus more of my work on the structural [06:00] issues around family wealth and Emily is more behavioral finance and interpersonal relationships related to the wealth. From a structural standpoint, we have so many conversations with clients considering the sale of their business about income tax issues and the capital gains issues. And frankly, if they haven't done a lot of work when they form the business, those issues are really hard to deal with.
What they can do and what they should consider is understanding the value drivers of their business. What kind of shape are they in? Do they have a customer concentration? Is their ability to forecast their financials and report accurate results in good shape? Is the leadership and management team long-tenured, and do they have the ability to stay in place?
So, those are some of the structural issues that drive value that clients really ought to [07:00] consider before selling their business. But what Emily was alluding to is that, once there's a document in place from a third party stipulating a value, then we are really challenged at what we can do to reduce the value of the business for transfer tax purposes in order to allow the family to keep the money in the family and in the community. So, structurally, what kinds of things have they done to keep their wealth and mitigate the estate tax in the future, and what can we do in the future, or before the transaction, and definitely before a letter of intent, to shift wealth around so that it does stay in the family?
R. Adam Smith: Right, now preparing for sale is a multifaceted experience; it's psychological, it's legal, it's financial, it's corporate, it's strategy. It's such a complex and interesting business and, of course, [08:00] there's a very large range of professionals that are engaged in helping private companies sell. But I think it's particularly tricky for family businesses because there's a greater threshold of emotional attachment to the business, and there's also different generations, and there's sometimes those complexities in the governance of the family charter.
Maybe talk a little bit about the conversations with these clients at Hawthorn at the founder level versus the board level and also the service providers — let's say their accountants and lawyers. Let's spend a couple minutes on that.
Emily Bouchard: Yeah, I think complexity is definitely the way to think about it. They often will have a lot of different viewpoints coming towards them from all the different advisors within their community that are all really necessary for considering a sale or not, and it can be quite confusing. Or, you might end up with great advice from one person, but if they don't [09:00] know some other things that have happened structurally, what may or may not be viable. And so, that's one thing that Jim, in the Business Owner Solutions Group, does is really help think about the whole picture and helping to kind of coordinate the communication.
In terms of the emotional side and the family side, it's so important before you think about selling to really look at, wait, to what degree is our family's identity wrapped up in this business? Is our name on this business? How deeply embedded are we in the community based on the business and what we've been doing philanthropically through the business? And starting to have those conversations early on in terms of who are we beyond the business, and what is the impact that we can have by expanding out, ways that we can have new interactions with the community, with other boards, with other companies if we don't [10:00] own this anymore. And if we are gonna keep it, what are the qualifications and standards for people within the family to be involved? And that's when the governance piece comes in in terms of, how do we do shared decision-making if some people are going to be owners but aren't in the business and others are owners but are in the business.
So, there's so many different complex issues. And Jim, please speak to that phenomenon of what happens with all the different advisory roles.
Jim Benedict: Yeah, I think it's an excellent question. One of the challenges that we've identified with clients when we're talking to them is that they're in the middle of this really maelstrom of advisors and non-advisors, frankly. We hear clients talk about ideas that they hear on the golf course or at a cocktail party. And the clients are at the center of the advisory wheel, so they're surrounded by people who don't speak a common language. Attorneys speak a different [11:00] language from accountants, from insurance advisors, from investment advisors, from financial planners, and the key is really for the family to surround themselves with good advisors to communicate with each other. And, the solution is really to have somebody that speaks multiple languages with the family to help them interpret and to get all the advisors in one room.
When our clients, or when business owners, are coordinating their own planning, really nothing happens. The process tends to stall out and you get a subpar result.
R. Adam Smith: We don't want to tell them that, right?
Jim Benedict: We actually would rather them get the right result. Yeah.
R. Adam Smith: How do you bring them all together though, and for, let's say, a couple of month period with the different levels of experience and between the vendors? What I'm interested in is, given the Institute for Family Success and — [12:00] as an aside, PNC Private Bank, Hawthorn Private Bank, just for listeners, is one of the largest in the world. So, it's quite vast and quite sophisticated.
So Jim, how do you bring these people together in the room to prepare for a smooth sale? Let's say you've got the lawyers, you have the founders, and then you have the governance and board and alignment side. I think it's really interesting. Love to hear your thoughts on that.
Jim Benedict: Emily can answer the governance issue, but from my experience is that the attorneys, the accountants, and all the other advisors understand that it's in their best interests to get the family aligned and to get each other aligned. It actually makes their job easier. I think what prevents it is just inertia. They go through their day and it's a lot of work to coordinate a group of people to communicate about a complex issue. When you're [13:00] talking about money and family and mortality, those are three difficult subjects for a lot of people. So, the advisors really, it's in their best interest. And a competent, good, solid advisor is going to want to have those conversations with their counterparts.
R. Adam Smith: I agree.
Emily Bouchard: I can speak to it from an example that we're working on right now where we have a local relationship strategist who's working closely with a closely held family business. They actually have two businesses. Three siblings own one business, five siblings own the other, and of course, they're interrelated. And then, there's 21 in the third generation, and they actually have fourth generation starting. And, these siblings are looking at, wait, what is our succession plan, and what do we need? Everybody's receiving distributions or dividends and what do we need them to understand?
So, [14:00] we're on the ground helping them with planning their first big family retreat where everyone's invited, even the spouses, and the advisory team is coming too. Their CFO is going to be there, their attorney is going to be there, their CPA is going to be there, as well as their on-the-ground local team, their investment advisor, and their banker, and their relationship strategist. And then, the Institute for Family Success comes in to bring in the structure for a retreat that will have the greatest benefit and value for the family.
And what Jim was alluding to is this whole thing around governance and how do you orchestrate something like this with a large family with multiple enterprises? And we're going to talk about the creation of a family council that may be different than an owner's council. So, there may be specific meetings that need to happen with people that are direct owners and operators of the business. And then there may be another one that's for [15:00] family members that are receiving distributions from the business, and they are benefiting from it, but they really don't have any involvement with it, or it's through a trust that they're beneficiaries of and a structure that they need to understand better.
And so, that family council, maybe a time when they understand about, what are the roles and responsibilities of being a beneficiary and a passive owner, as opposed to an active owner? And then, they may have a family assembly that could have all the in-laws, even younger kids, and really talking about, what's the purpose of this? Why do we have it? Why does it matter? So, we bring in that concept and that allows for really effective, efficient meetings to happen with the right people in the room at the right time
R. Adam Smith: Yeah, we discussed some of these structures you mentioned on the governance side in past episodes, including with Richard Wolkowitz, who was on the call today, and also with Christina Wing at Legacy, and also [16:00] with Karen Costa at RSM. It's quite interesting to think about the different decision-making platforms because, when I speak with a client about preparing for a sale, the medium of governance and control is really all over the place sometimes. It can be just with a single founder, it can be with a whole board, it can be with the council as you say.
And Jim, I'd like you to talk a bit about transitioning those conversations into legacy, which we talk about often here on the audiocast, and also talking about the deployment of that wealth generation. And then, we'll move from there a bit into philanthropy as well.
Jim Benedict: Sure. So, the way we think about, or I think about, legacy is I think, very often people like me will gravitate first to structure because that's where we're comfortable. [17:00] Here's what the answer is. What we really need to do is step back and talk to the family about their why. It's almost become cliche in the wealth management business to talk about why, but it's really important for the family to understand what the purpose of their wealth is. How does it impact the family, and how are we going to deploy it, and for what purpose?
To Emily's point, which I'm sure she'll make, what are the rules of engagement around the wealth? What's the expected behavior around the wealth, and how are we going to document that to ensure that future generations carry on the legacy of the generation that generated the wealth?
As far as deployment is concerned, that does get into structure a little bit more, and it's really important for us to understand what the family wants to do and take the easiest route, if you're talking about charitable planning, to get there. [18:00] And then, to provide the family mechanisms to measure the impact of their wealth if it's devoted to helping other people.
R. Adam Smith: Okay.
Jim Benedict: One of the things that Emily did mention that I want to touch on quickly is that structure can mitigate family disagreements down the road. And particularly, if you start planning early enough, you can deploy your wealth and leave it to subsequent generations so that you don't create descent within the company that generates the wealth because you leave non-participating family members shares of the company. That is often a recipe for dissent down the road, even though everybody's getting along now. The participating members, the people running the business, have to make capital allocation decisions for the business that may conflict with the personal capital [19:00] needs of the uninvolved family members. And so, it's really important to step back and understand what you're trying to accomplish and how structure can help maintain family harmony down the road.
R. Adam Smith: Wonderful. Well, managing the family dynamics is crucial in integrating new family members and in-laws also into these structures. I know from your experiences at PNC Private Bank Hawthorn, and Jim also, over your career, you've had to deal with strategies that can bridge these dynamics to make for smooth inflection points in the wealth of the families, right?
I'd like to move bit into the actual sale process. So, Jim maybe talk a bit about, what's going on with the large single-family offices today in this market and how are they thinking about monetization? Considering, let's say, a recapitalization versus a sale, making that decision is important. [20:00] The first one provides for cash distribution, but it doesn't result in the difficult financial and emotional disconnection with the sale. And then, also talk a bit about this concept of deferred consideration and earnouts and how these considerations can ease the pain sometimes in these transactions and the price discovery.
Jim Benedict: I'll talk about how family business owners look at sale versus debt recapitalization or dividend recap. First, it really depends on where they are in the business, who's involved, and what their vision for the family business as an entity within the family is.
So, do they intend to keep it? That’s the simplest way to put that. If so, and they want to take some money off the table for a variety of reasons, and the company is generating enough cash to service the debt, then a dividend recap might be on the table for them. [21:00] You're essentially using the cash flow of the company to pay back the debt, and the family receives cash outside the company to go do other things and accomplish other goals. So, we spend a fair amount of time with our CNIB partners discussing those options with closely held business owners and their families.
The sell side really comes into play when they've run out of options internally within the family, or the owner of the business is going to make all the decisions and they're just kind of done with it, they want to go to the next thing in their life, the next phase. So, there are a lot of different reasons why families decide to sell businesses. Where we see challenges [22:00] is the communication strategy for if there are children in the business, but the patriarch or matriarch, the head of the family and the owner of the business, they're going to sell it essentially out from under the children.
R. Adam Smith: Okay.
Jim Benedict: And so, that strategy is something that Emily's team works on. And I'll stop here and let her comment a little bit on that before we move into the earnout discussion.
Emily Bouchard: I think the one thing I want to add is the nuances of the fair versus equal. A lot of times the founders will really want to treat all their children equally when that might not be realistic, especially in what Jim said earlier, or it wouldn't really be fair in terms of people that have worked really hard in the company and helped to build up the value. And so, helping them really navigate those conversations and then look at creative strategies for how to equalize it out if they are going to sell. [23:00] And then, the other side is when you're keeping it in the family. And, if you do decide to have everyone have the access of being owners, it’s essential to have some sort of understood structure for how somebody could opt out if they choose not to want to continue to own it where it will again help facilitate family harmony, and it's all understood at the outset what that looks like so that there's less likelihood of contention. So, that's a couple of things that have been best practices that have been shown to be really helpful for family businesses.
R. Adam Smith: That’s great.
Jim Benedict: Yeah, I'd say dividend recaps can be used. It's a great opportunity to do some estate planning because the debt on the cash cow of the business reduces the value. It's an awesome opportunity, to Emily's point, to take out minority shareholders that might not want to remain under the business and they'd really rather have the cash.
R. Adam Smith: Right. I do recommend those who are listening today and in the future to reach out to Jim or Emily. [24:00] Also, Rachel and Allen are on the call as well, so it's great to have some of your team here. I just want to take a brief moment to highlight the uniqueness and scale of PNC.
PNC is one of the largest bank holding companies in the country, in the world. Depending on the ranks you look at, it can be top six, top eight, it has almost 3,000 branches. It’s a public company, of course, originally from Pittsburgh, from 1845. It's one of the oldest, longest-standing operational banks in the country, 172 years ago, which is really impressive. The management, the board, the governance, the brand is considered one of the strongest in the country and it's an organization I've admired a long time.
Maybe, Emily, you can also talk a bit about the private bank and the uniqueness of the Hawthorn division briefly and then we'll come back into some tactical conversations.
Emily Bouchard: What's really unique about it is [25:00] PNC Private Bank Hawthorn is a large multi-family office suite of services that covers the whole nation and that's something that Business Owner Solutions and Institute for Family Success are part of. We also have a philanthropy and impact group, a risk group, the wealth strategists, and then a family office services group and a highly trained investment team. And then, we have our teams that are regional, market-based, on the ground like your Main Street bank, and they really know the clients exceptionally well. And so, the clients get this local supportive team that's very well versed in what the families need or what the family businesses need, the family offices need, and then these national services come and bring specialty expertise when needed and shore up and work really closely with the regional team.
So, it's a wonderful [26:00] design that's a bit unique. So, that's how it's been structured, and it seems to be really well implemented in all of the markets where there's a seamlessness with it.
R. Adam Smith: I see that. And Jim, I mean, Hawthorn is a unique brand. There are very few independent brands of scale within the large global depository institutions and commercial banks. I'd like people to appreciate that there is a different division that deals with some very high-level clients. I guess that's also helpful too.
I’ll move into some things that you guys work on together. Let's move into succession planning. Succession planning, talking about wealth, can be quite complex. And we're seeing a massive transfer of wealth, as we know, between the G1, all the way down to G2, 3, 4, 5, 6, what have you. So, would love to talk about how you work with these clients these days in this world of massive wealth generation. But also, there's lots of interest in diversifying wealth, right? [27:00] In some of the previous conversations, we've talked about setting up different private equity activities, there's real estate investing, there's lifestyle activities, there's art, there's incubating different businesses.
Jim, maybe talk a bit about how Hawthorn is experiencing this expansion of massive wealth generation, and where's the money going?
Jim Benedict: It's really all over the board, honestly, and the way Hawthorn works with families, to Emily's point, the way we're structured is we have local people, local delivery of national expertise. One of the groups within Hawthorn is investment advisory that only focuses on ultra-high-net-worth families and the wealth they've generated. And with more wealth comes more opportunity. What we're seeing is, is families maintain the generator of the cash but then take that cash and branch out [28:00] into additional businesses. Very often, they'll use a dividend recap in order to do that so that they can keep the entity that's generating the cash.
But, there's not really one direction families go. And I wish we had our investment management team on here to talk about what they're seeing in terms of investment management. I will say, shifting gears a little bit, what we are seeing, and the way we think about wealth transfer, is reduce, freeze, replace. And so, one of the things you'll see us talk about, and as many of the competitors in the industry, is the looming change in the tax code of ‘17 and the reduction of the individual exclusion amount for transfer tax coming in 2026. [29:00] So, we're really focused on making sure clients understand the impact of that on the family, not just now but for their life expectancy, because the value of a transfer just multiplies over the life expectancy, and some of our clients can live another 40 years. So, that's really impactful.
Emily Bouchard: And then, I can jump in in terms of you spoke earlier about legacy and the importance of really acknowledging and knowing where you've come from. The other thing that we're seeing is a real trend towards this openness towards innovation and allowing for what the rising generation is seeing is needed now. The world's such a different place than when maybe the business first started, or all the things that got us to this inflection point where we are now. And, one of the things that's so vitally important is the cross-generational communication where there's a deep regard and respect [30:00] on both sides. And the more you can wrap it around with some shared values that the family holds and a shared sense of purpose and for the sake of, why do we even have this? And then you really talk about all the things that brought you to where we are now. What are the things that we want to maintain and keep going forward? What are the things that aren't necessarily serving us in the same way?
And so, it's kind of the context around the content, which makes such a difference in how families go about their decision-making related to where they're going to be investing going forward. And Jim and I just recently had a chance to speak and get to know a fifth-generation family member of a very large, very successful household name family business. And, one of the things that she shared with us was that her family created a private equity fund within their family structure, and they invested in businesses that the fifth generation was [31:00] interested in pursuing to begin to diversify and also build leadership abilities and capabilities and see what their competencies were as they were looking for where the business was going as well.
R. Adam Smith: Exactly.
Emily Bouchard: And that's another great example.
R. Adam Smith: It is. Actually, I had a similar conversation last month on this audiocast with the Chapman family of Barry-Wehmiller in St. Louis, where I'm from. And, it was great to hear Kyle Chapman, who’s G2, talk about that exact structure. It was really fascinating. And, we had a similar conversation about this recently with Karen Costa at RSM talking about these ancillary, and subsidiary, and derivative activities to diversify the wealth. It's really interesting.
We have time for a couple more items to talk about. So, let's cover post-sale briefly to again talk about the monetization of the wealth that it's actually all of a sudden available, [32:00] and then, you know, what the heck do these wealthy families do with it? What's happening these days in the market, and where's it going, and how are some of these legacy considerations factored in?
Maybe, Emily, we can start there, and then Jim.
Emily Bouchard: I really love talking about post-sale way before a sale happens because there's some things, like the short-term things to be considering, as well as long-term. So, I want to just say out the gate, and maybe this has been shared by other guests, but it's just so important like the moment a sale happens, if you don't have a continuation of being involved, if it's a straight sale, those locks on the door change the next day. And so, you want to make sure anything meaningful for you, any memorabilia, anything that mattered to you in terms of the history, you want to make sure that's not necessarily included in the sale or that you really negotiate which parts you want to keep or how you might want to capture those stories or pictures or articles, [33:00] whatever it might be, the things that you pass by on the wall every day so that the family still has that as part of your living legacy.
And then the other is, especially going back to the philanthropy question, if there's been a lot of charitable giving that's been happening in the community through the business and that the family has a strong identity in, you want to be thinking pretty proactively way ahead of a sale about how you want to continue that so that post-sale you already have some really nice foundation in place and you have this sense of, oh my gosh. With this effusion of tremendous wealth, we want to be really wise about how we're utilizing it now and for future generations. And, where do we want to give back?
And that's where working with your whole planning team is really important in terms of, what's the lifestyle you have now? What do you see you're going to need? What is your longevity, right? Because we are living so much longer. And then, what is realistic and really healthy for you to be thinking about in terms of giving, giving back, the impact you [34:00] want to have with your time and your money too, because now you have more time?
And like you were saying earlier, how in terms of being a consultant on boards, there's a lot that can happen in terms of having an impact on other businesses that you care about in your community or in the world that are moving the needle forward on things that you care about that you could add extra value to in those kinds of positions.
So, really thinking about that third act. What is it in this next chapter that I’m going towards? There's a lot of research that says a lot of business owners, even though they're really thrilled at the sale and the number and everything, they can have a lot of regrets.
R. Adam Smith: Right.
Emily Bouchard: And it has a lot to do with not having a clear sense of where they're going.
R. Adam Smith: Good. How about you, Jim?
Jim Benedict: I think the way to manage post-transaction issues is to plan for them pre-transaction. A little bit to Emily's point, [35:00] the third act was definitely on my mind and golf is not an option. So, one of the things that we spend time with our clients on is really pressing them on what gives them a reason to get out of bed on the Monday morning after they close on a transaction and they don't have a reason to go in to work, where they've spent their career building something where they are the person, they've got all the responsibility. And all of a sudden, if there isn't an earnout in place and they're no longer going to be with the company, they lose meaning and they need to have that. We all need that. So, what is going to provide that? And start thinking about that pre-transaction if you don't already have something.
I'll say one of the trends that I'm noticing is that families are looking for charitable options. We've had probably two conversations in the past few months about the Patagonia deal and using a 501(c)(4) [36:00] structure. This structure is very popular in Europe. We haven't gone anywhere with it, but it's interesting that we're seeing more families want to benefit their local community without actually selling the business because keeping the business, in their view, does benefit the local community.
And finally, as far as keeping the wealth in the family, we believe that pre-transaction planning helps accomplish all these goals because the value of the estate transfer and the value of a gift multiplies over time.
As an example, after 30 years, a $10 million gift into a trust at a little over 7% is worth $80.5 million. And you just saved $32 million in transfer tax on that. So, my overall point is that it’s never too early to plan for post-transaction. What are you going to do? What's going to be your meaning [37:00] once you don't have a business to run anymore?
R. Adam Smith: Absolutely. I'm so motivated and impressed with Patagonia as a brand, as a culture, and the decision to create a social welfare hybrid organization essentially. For those that are not familiar with 501(c)(4) and the Patagonia decision, it was quite remarkable at the scale and to create a business that is for good. But those contributions are not tax-deductible and those activities cannot be directly benefiting the business interests of the company that actually established them. So, it's quite different than a 501(c)(3). It's massive news on the nonprofit scene, as well as the recent news of the Gates Foundation, of course, which we don't have time for today.
So, we're just going to wrap up pretty soon. We're over time. But, certainly, the range of topics that we discussed today by Hawthorn and Jim and Emily are super important, very complex, multifaceted, [38:00] and worth some further conversations with them. So, you can reach them at PNC Private Bank Hawthorn, as well as directly on email and LinkedIn.
It's been wonderful to have all of you here today and join in. I appreciate it. And Emily and Jim, thanks for your time. It's been great to meet you and get you involved and talk a bit about more of yourselves and the organization.
Jim Benedict: Thank you.
Emily Bouchard: Thank you so much for having us. And it's a wonderful service that you're providing by doing this, thank you.
Jim Benedict: It's my pleasure
R. Adam Smith: Great to have you as well today, Jim.
Okay, this is R. Adam Smith signing off. Please stay tuned for the next episode of the Family Business Audiocast on LinkedIn.
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Explore the strategic intricacies of family business success with the RAS Family Business Audiocast. Join R. Adam Smith as he delves into exclusive discussions with global leaders shaping the future of private wealth and enterprise. Each episode offers a rare glimpse into the core decisions driving prosperity in high-stakes markets. Tune in to gain expert insights and innovative strategies that empower family businesses to thrive across generations.
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Family Business Audiocast™
