Successful Multi-Generational Living in 4 Stages

The art of multi-generational living: an interview with Gary Klaben.

Gary Klaben: Principal at Coyle Financial, West Point grad, Author, and he possesses firsthand experience in multigenerational living. Gary discusses the four stages to the art of successful multi-generational living on Alan Olsen‘s American Dreams Show.

In today’s fast-paced world, the concept of multi-generational living is gaining renewed interest. Gary Klaben, a seasoned financial advisor and author, has not only studied this lifestyle but is also practicing it on his 67-acre estate, where five families live together. In a recent interview with Alan Olsen on “American Dreams,” Gary shared his insights on multi-generational living, the inspiration behind his new book, and the four-stage process he recommends for families considering this path.

 

The Moment of Realization

 

Gary’s journey began in 1991 during a routine estate planning meeting. After helping a client’s children save $2 million in taxes, he felt an unsettling concern. “I realized I think I’ve just been party to a crime, not a crime now, but a crime somewhere in the future where these children are going to receive an extra million dollars each, and it’s going to destroy them because they know nothing about money,” he recalled. This epiphany led him to dedicate over 30 years to educating second and third generations about wealth management.

 

A significant influence on Gary was Doug Andrew, whom he met about 20 years ago. Doug discussed building a family estate with multiple houses, which planted a seed in Gary’s mind. Four years ago, Gary turned that vision into reality by establishing his own multi-generational estate. “We have five families living multi-generationally on the 67 acres that we’re on currently,” he shared.

 

The Four-Stage Process

 

Gary outlines a four-stage process for families interested in multi-generational living:

 

1. Foundation Stage: This stage focuses on building trust and communication within the family. Drawing from the book “Preparing Heirs” by Roy Williams and Vic Preisser, Gary emphasizes that 60% of wealth erosion in families is due to a lack of trust and communication. This stage involves conflict resolution, visioning, and establishing governance through charters and bylaws.

 

2. Structural Stage: Here, families address the practical aspects of combining finances, taxes, and estate planning. “How do you structure the financial, the tax, the estate—all those elements that go together?” Gary asks.

 

3. Transaction Stage: This involves the actual purchase of a property. Large estates come with complexities like financing challenges and potential legal easements. Gary notes that traditional 60-day closings are rare; it can take up to six months to finalize such transactions.

 

4. Transformation Stage: Living together changes the dynamics of family relationships. “Support is different. How you communicate and build is different. Everything is different,” Gary explains. This stage is about adapting to new living arrangements and nurturing the relationships within the family collective.

 

The Philosophy of Seven Generations

 

Gary adopts a philosophical approach inspired by the Iroquois Native American tribe, which considers the impact of decisions on the seventh generation. “They select the seventh generation because no one living at that moment will ever know them, and therefore it takes all the agendas off the table,” he explains. This long-term perspective influences decisions like opting for stainless steel pipes over galvanized ones for well water on family compounds. The immediate costs are higher but it ensures the safety of future generations.

 

Challenges and Governance

 

Multi-generational living isn’t without its challenges. Gary highlights the importance of governance to manage the complexities of increased relationships. He references Robin Dunbar’s theory that humans can maintain about 150 stable relationships. In a multi-family estate, the number of relationships can skyrocket, leading to potential conflicts. “There’s bound to be some conflict between those folks, just because there’s a lot of relationships going on,” he cautions. We can learn sad lessons from a family estate that dissolved after 100 years due to the disruptive behavior of one member and the lack of governance structures to address it. This underscores the necessity of having clear rules and mechanisms in place.

 

Conclusion

 

Gary Klaben’s commitment to multi-generational living extends beyond professional advice; it’s a way of life he’s embraced and advocates for others. His new book serves as a guide for families considering this path, aiming to help them avoid common pitfalls and build lasting legacies. As Gary eloquently puts it, “Seniors need more connection, and the younger children need more connection… There’s nothing better than having multiple families to be able to do that.”

 

Contact Information

 

For those interested in learning more, Gary can be reached at his email: coylceo@coyl.com. His book is available at multigenbook.com.

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Transcript:

 

Alan Olsen

Music. Welcome to American dreams. My guest today is Gary Klaben. Gary, welcome to today’s show.

 

Gary Klaben

Thank you. Alan, happy to be here.

 

Alan Olsen

So Gary, we’re going to talk about your new book on the multi generational living. You know what inspired you behind this? But before we do, I would like to get for the listeners some your background of what inspired you to write this book, what you’re working on in your life, and and, and then we’ll do more of a deep dive into this during the interview.

 

Gary Klaben

Great. Thanks. A quick story. So in 1991 Alan, I was meeting with clients on a Saturday because their children couldn’t make it there to do some estate planning documents. And signed the documents, and at that moment, they saved about $2 million their parents if they passed away immediately afterward, I’m driving home, and I’m really got this deep down bad feeling in my stomach.

And I’m like, I don’t know what’s going on. It’s my wife, my kids, my family, my friends. And I realized I think I’ve just been party to a crime, not a crime now, but a crime somewhere in the future where these children my age are going to receive an extra million dollars each, and it’s going to destroy them, because they know nothing about money.

And it really bothered me deep down. I wanted to go back and destroy the documents, but then I had a second thought, and I said, you know, I think what I can do is try to help the second third generation learn about money through a variety of different ways, and I’m going to do that. And so I’ve been doing that for over 30 years, and that started the multi generational part of that.

The second part was actually somebody you and I both know. I think Doug Andrew, I was in a meeting with him maybe 20 years ago, and he said, I’m going to build this family estate. I bought this property with all these things, with all these houses, and I said, I want to do that.

And that kind of planted the seed my mind 20 years ago, and then four years ago, we basically ended up moving on to our estate now, we have five families living multi generationally on the 67 acres that we’re on currently. So that’s kind of a quick overview.

 

Alan Olsen

So in So, so this is not just about explaining what to do, but you’re also personally practicing this in your own life, which is which a lot more credibility to to this that the how do we do things? What is the four stage process for establishing the multi generational living? And how do you approach a selection of a property for a family?

 

Gary Klaben

Yeah, and I want to cover one fact, and I know you know this Alan too, that 91% of families fail completely lose their wealth in three generations. We call that shirt sleeves, the shirt sleeves and three generations, and around the world, they’ll call it rice paddies to rice paddies. You know, basically it’s the same thing, and money gets destroyed.

So when you’re looking at these stages, the very first stage is a foundation stage, that particular stage, so you understand key in the stages. There’s a book written by Roy Williams and Vic presseter called Preparing heirs. And in that book, they did a study of 1000s of families and found that 60% of the reason why that shirt sleeves, a shirt sleeves, happens in three generations is based on trust and communication.

So those two things are the keys to families living long term. So the first stage, the foundational stage, is about trust and communication. It’s about conflict resolution, visioning and governance, the rules that families live by, charter and bylaws. The second stage is really structural. Again, an area you and I both deal with is, how do you structure the financial How do you structure the tax?

How do you structure the estate, all those elements that go together there. The third is the transaction itself. And that’s, there’s a lot of moving parts. Large properties have lots of complexities to them in a whole variety of areas, and want to make sure everybody understands it before they go and buy one of these properties. And then the fourth stage will make a lot of sense.

It’s just the transformation, because when you’re living with you and your close, nuclear family, that’s different than living with in my case, now there’s five families, you have a whole different situation. Support is different. How you communicate and build base different. How you live is different. Everything is different. And so there’s a transformation that goes on everybody on the state relative to that.

 

Alan Olsen

So, so when you’re when you’re looking and working with couples, is there a key question that the couples will often ask during the wealth management process that influence your focus on multi generational planning?

 

Gary Klaben

Yeah, it’s interesting. You know, usually we’ll have somebody come in because they want us to look at helping them with finances, their money, their wealth management. Yeah. Right? And once we kind of got that together, getting their state together, and the other things, taxes and so forth, they want done. Invariably, the very first question that they ask is, can you help my children?

In other words, they realize that them going through this process has helped them significantly. And like any good parent or grandparent, they want to make sure their children are better off than they are. So it’s a key question, can you help my children? It’s kind of the going back to the story I told earlier, and what, what I determined was, well, then we’ve got to have a process.

A way, to address the children and the grandchildren’s needs around money and how they’re going to receive all this estate from their mom and dad and all of that. And so we’ve, we’ve been basically, over the last 30 years, figured out how to do that in a lot of different ways. And this living multi generationally is just another aspect of that, another, you know, part of that whole, whole process we go through passing wealth from one generation to the next.

 

Alan Olsen

You know, it those people that have gone through this process fully understand that they’re there. It’s not an easy process. I think you mentioned that sometimes earlier in this conversation, when you get to the third generation, that the wheels will often fall off the cart because, you know, the value system and understanding of money is not the same as in the first generations.

So there’s an approach that you’ve taken. The philosophical approach is seven generations, and in in how does this inform decision making through multi generational planning? Why settle? Yeah,

 

Gary Klaben

that’s a really good question. Ellen, so there’s a gentleman named Alan, excuse me, Jay Hughes. He’s pretty well known in the single family office, multi family office space, because he’s kind of the guru on everything we’re just talking about. And Jay’s written a couple wonderful books. One of his books I read back in the early 90s, Jay mentions the Iroquois Native American tribe, and that tribe how they go, how they go about making major decisions.

And what they do is philosophically, they say, when they meet for a major decision, how will this decision affect the seventh generation? They select the seventh generation, because no one living at that moment, even the baby, just just born, will ever know the seventh generation, and therefore takes all the agendas off the table, because now they’re thinking about it for the good of that tribe and how that tribe operates.

And I’ll give you an example on a property. So we were putting in another well, because we didn’t have enough water flow for our property, and we we had to go down 750 feet. We got the dowser would have been a lot less, but we didn’t. And anyway, dowser finds some water, so we’re going to be putting in the pipe to bring the water out. And the standard is galvanized pipe. You may not know this.

I didn’t my son in law, who’s an expert in Syria, the galvanized pipe eventually leeches lead, so then you’re going to have light in your drinking water, which is not good. Most people would say, just put the galvanized pipe in, because it won’t happen for, you know, 20, 3040, years, and we won’t be here, because we would have sold the property. So it doesn’t really matter.

So the gentleman who was putting in the pipe, we simultaneously, we all said, We want stainless steel. And he said, You know, it’s going to cost you 12,000 more put stainless steel in, and we all said, No, it doesn’t matter, because thinking seventh generation, we don’t want to poison the water for our family down the line. And that’s where it’s a different decision, thinking philosophically that way versus the normal way we tend to think about our properties.

 

Alan Olsen

Now so Gary, when, when people are going through this multi generational planning, what are some of the common pitfalls that they run into, setbacks and adjustments that that they need to navigate? Yeah,

 

Gary Klaben

the biggest ones that happen after is really that communication, trust and communication side of it I mentioned earlier, and you probably know this time, people out there might remember this gentleman named Robin Dunbar came up with Dunbar’s number, which is 150 net number is how many people you and I and every human being can keep track of. It’s about 150 folks.

Why? Because it’s about 11,000 relationships you’re keeping track of, and that’s the cognitive ability that we have. So when you think about this, a family of let’s say four has six relationships, and let’s say you put three families of four together on an estate, you go, well, that’s no big deal. It’s three times as many relationships. That’s not true. You. Goes up to 66 relationships.

So there’s bound to be some conflict between those folks, just because there’s a lot of relationships going on, and I don’t think we give much thought to that. You having a larger family, you know what I’m talking about. You grew up, you had a lot of relationships going on that you guys keep track of, but if you took another large family of yours together, it goes up exponentially, and that’s why you want to be careful to make sure you know what’s going on there.

You have governance and the other issues. That’s just the one side. The other side is these. Are these transactions. Are legal beast financial beasts, like, for instance, you can’t get regular financing on one of these properties. You have to go out many times they get private financing. This only way to get it funded. And private financing takes a while. So the normal 60 day close doesn’t happen. It can take six months.

Then here on the East Coast, you have a pro, at least our own personal research, over 50% of the properties have some kind of easement, historical easements. They have municipal easements, they have charitable easements. And the issue is, you can’t do anything. You buy the property, and you’re not allowed to change the structure and so forth.

So you get hamstrung, and now this seventh generation philosophy won’t doesn’t even work because of those issues. So and there’s, there’s a lot of other moving parts relative to it. So the reason I wrote the book was because of the fact I had many people ask me, How do I do this? And I said, Well, I’m going to write a book so you can avoid these pitfalls and make sure you are do have a successful outcome when you go to do this.

You know, whatever, whenever you you plan on doing it. It took us about four years of planning before we got into because, as I said, Alan, it’s not like buying a single family residence. There’s just a lot of different elements that you’re going to go through to make sure it’s a successful outcome.

 

Alan Olsen

Now you publish a white paper after interviewing some 20 families about their experience in multi generational living, what are some of the significant insights from the families who’ve been living this way, both under short and long periods, and I’d really be interested in understanding some of the successes that you’ve Seen in those 20 families and in Bailey, sure,

 

Gary Klaben

there were three families that interviewed that were around for 100 years, which, you know, this long time they’re on their sixth, seventh generation. One of them failed, and the two others are still going. The one that failed was due to really not having governance. And what I mean by that is this family basically had a son in law of one of the this is now the fifth or sixth generation.

I believe it was who came into the family, and he was just a really difficult person. He came in, he would be out all hours a night, drinking and firing off his weapons on the property, and he was killing animals and throwing them around. It was just a lot of stuff that was not really good behavior. And they kept trying to get him to stop, and he wouldn’t.

And eventually, the mother in law, one of the there was, there was a bunch of families here together. Said, You can’t force him off the property. When all the other family members came to her and said, We want to have him move out the property, and she forced to sell the property. And basically, these families now have all dispersed. And I talked to one of the he was third generation, 70 year old, and he could tell talking to him, he really wished they were back together again.

They really loved that lifestyle, but because they didn’t have any way of addressing that person, it kind of blew apart. And they could have learned from it. And I was told by another 100 year family that they saw that happen as well, and they had put this stuff in place so that wouldn’t happen to them, because they’ve seen that issue arise, you know, come up anytime.

So that’s just one, you know. Learning piece here why governance is very important when you have a lot of folks living together, because you can have a bad apple now and again. You got to have bill

 

Alan Olsen

address that, you know. So I Gary is the what’s the best way to contact you or reach out for more information. Well,

 

Gary Klaben

two things, firstly, if they want to get a copy of the book and go to multi genbook.com, M, U, L, T, I, G, E, N, B, O, k.com, to get the book, if they want to do that, then they can also through there’s an email that can enter to get more information. Or they can, you know, contact me directly at my email, which is coil c o, y L, E, C e, o@coil.com so it’s coil c o, y L, E, C e, o@coil.com and they can reach me that way, and I’d be happy to help.

This is an area that I absolutely love, and I love seeing these families to get together. Other I know Alan. We’ve talked about it. You’re a big family guy. I’ve always been I’m from a family of 10. I love that whole environment. It’s just been in my blood since I was born. And I just want to help these other families and making sure when they do form these estates, that they they’re successful in doing that, and then you get all the benefits from that, you know.

Because I gotta tell you, seniors need more connection, and the younger children need more connection. And different times and things are bad going on in our life. We need others to support us, and there’s nothing better than having multiple families to be able to do that.

We see that happening here with we’ve already had one of our residents pass away, and we’ve also had some issues with some you know, going on, and you have a lot of folks who can stop up and and pitch in and makes a big difference, not then you’re not kind of out there by yourself, you know, fighting the world, you know, I think makes a big difference.

 

Alan Olsen

Well, Gary, it’s been a pleasure having you with us here today on American dreams.

 

Gary Klaben

Hey, thank you. Alan. Appreciate it.