The great wealth transfer is coming, and some may have considered it started already, yet we are woefully underprepared. Not just millions or billions of dollars, but trillions of dollars that will need to be transferred. Not just one or two trillion dollars, but twenty to thirty, and some estimates suggest even more. According to an article published earlier this year from Caring.com, less than ¼ of Americans have a will or estate plan in place.
The holidays are coming, and for many that means an opportunity for the whole family to be in one place. Although it may not be the most pleasant topic, it may be a serendipitous occasion to start or continue a conversation about the family wealth so as to avoid squabbles later on. Many families avoid talking about politics, religion, or money at the dinner table. In fact, the holiday dinner table may not be the best time to address questions of money management, but that doesn’t mean an occasion can’t be created or that there aren’t established guidelines to doing so.
A family meeting is a way to create a forum for questions with a financial professional present, and the trust officers at Garden State Trust company can help with that.
What does a family meeting address?
A family meeting can address the current status of family wealth, expectations for the usage of that money, and establishment of communication mechanisms for future wealth management. This means letting children and grandchildren know what may be in their future. If the inheritance could be substantial, they should have a plan for it. The meeting may serve as an introduction to the professional advisors who are currently assisting the family, such as the estate planning attorney and trust or wealth management officer. Regardless of whether the next generation chooses to stay with these advisors, knowing who they are and how to contact them will create an easier transition. The trust officers at Garden State Trust company are here to facilitate a smooth transition, whether the assets continue to be managed by us or not, so don’t think that just because the assets may be moved the introduction isn’t worthwhile.
Having those types of talks early on can help avoid misunderstandings and conflicts later on, but more importantly, they open the door to speaking openly about wealth as a family. There are still large issues to address, especially if the family has unique assets that will be passed on such as a family business. More and more, affluent families are coming up with a family “mission statement” regarding the management of the family wealth or business for the future.
The family meeting defines roles and priorities, and opens up a time for questions to be asked on topics that might otherwise be awkward. Questions such as:
- Are the assets going to be managed externally or internally, by multiple parties or a single party?
- Will any beneficiaries want a full inheritance immediately, or object to having a single trust to continue to manage the assets?
- Will any children object to the costs of management? If a family member will be in charge, what compensation is appropriate?
- Will a portion or all of the estate be put toward philanthropic goals, and should that be expressed ahead of time to alleviate any confusion?
Some of these topics may seem especially difficult to bring up. For example – “Will there be any objections to an unequal division of assets”? This may seem obvious to the head of the family, and that explanations are not required, but verbalizing the reasons helps manage perception to avoid conflict later. After all, there are many valid reasons for such an unequal treatment. Perhaps some beneficiaries received more support during life, or have a greater need, such as a special needs grandchild. Perhaps there is a desire to move a family business fully into the hands of the child with an active role, excluding other children to reduce conflict, but providing them with a larger portion of the liquid assets of the estate.
If family members are going to be designated to manage assets, they should be to brought up to speed on what fiduciary duties are, how much time and expertise they may require, and the value of having an impartial third party involved in decisions that may be not always be popular.
What should the first step be? Talking to my trust officer?
A family may want to bring in the family’s trust officer right away, or have the family meeting more privately at first. The formalization of a meeting allows a sense that these aren’t unusual issues, and helps walk through them one at a time so questions can be answered in a positive way. Some questions may not be financial in nature but should still be addressed, such as what will happen with sentimental value items, or who will become the new caretakers of pets.
We aren’t going to say that it’s not difficult, or that we can make it easy. Wealth transfer is hard, which is one reason why less that 25% of Americans have a will or estate plan as mentioned earlier. We can share our experience and expertise, which may make it easier to broach the topics and come up with a plan the family is satisfied with. We can be part of the meeting, or just consult to provide guidance on how that meeting usually goes and things to make sure the current family’s wealth manager may want to bring up. Contact us to let us know how we can help within your family dynamic.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
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