Get everyone on the same page
Families and advisors have historically existed within the legal realm of estate planning. Unfortunately, this relationship has often put what we are talking about—honest expression of values, feelings, love and intentions about the transference of wealth—on the sidelines. The unintended consequence of this relationship results in misunderstandings, loss of love and an ineffective relationship between families and advisors.
Thoughtful advisors have access to a variety of tools that not only bring your estate plans to fruition but bring your family along in the process, thus eliminating any unwanted surprises. Including your advisors, executors, trustees, and guardians in conversations about your goals and intentions can help to ensure the successful transfer of your wealth will be packaged in your values.
By expressing those intentions and values to your family and your advisors during your life, you put everyone in a much better position to execute those intentions.
Steps to success
The Center for Family Legacy is here to help with these conversations and provide useful perspectives.
Specifically, we have found that it is often useful for you and your advisory team to take a collective breath and a deliberate step back in order to view the communication issue as part of a much broader analysis of the family’s non-financial makeup. Often, the first step is the discussion of your “money history.”
The detailed questions in the accompanying chart are designed to help uncover, and critically consider, five core issues:
- What childhood influences color your current concepts about wealth?
- What is your current attitude towards wealth?
- What are your beliefs about how money should be used?
- What are your beliefs about how money affects relationships?
- What are your initial thoughts about communicating money issues to your family?
This exercise can help you and your family consider the messages you are passing on to your heirs—consciously or otherwise—and whether some of those should be revisited. The objective is to learn from the past both what has worked and what you want to do differently.
Inevitably, families who pursue this exercise and see the importance of communicating more directly with their family members will ask: When, what and how to communicate?
When should we start?
Quite simply, the best time for you to talk about your estate plan is “now.” Ideally, this communication is a process, rather than a one-time event, as it needs time to unfold.
The most effective approach is to start with an introduction of basic financial concepts when your children are young and then introduce more sophisticated topics, such as trusts and taxes, at appropriate ages.
Obviously the nature of your family’s relationships will affect what is said at any time, but some additional communication is usually helpful at every stage. The tax and financial topics are often unfamiliar to at least some family members, and take time to sink in.
The emotional issues that underlie the entire topic often need to be identified and fully expressed before the content can truly be absorbed. And, overcoming the misconceptions left by the powerful negative messages about wealth delivered by society and extended family may require consistency and repetition.
The most successful families view the communication process as iterative and learn from the reactions of their family members at each stage of the process.
What do we say?
Families who center the communication on shared family values have the best experiences. The “money history” discussed above is a good place to start, since it is impossible for you to communicate your values around wealth until those values are first fully understood.
Productive discussions about shared values include those that reveal the meaning of money to each of your family members. The discussions also celebrate the history of both your family and the wealth, with a special focus on the hard work and accomplishments of those who created your family fortune.
Children who understand their family’s history and values can more readily see the estate plan as a manifestation and continuation of those values. They can accept the plan more authentically and are more likely to adopt the shared family values in their own subsequent planning.
According to author and family governance expert Jay Hughes: “To successfully preserve its wealth, a family must form a social compact among its members reflecting its shared values and each successive generation must reaffirm and readopt that social compact.”3
Once your family agrees to communicate early and often, and to center the discussion on shared values, a few helpful guidelines can facilitate the process.
- To begin, everyone involved should have an idea of the overall flow of the plan, rather than the details, in order to give all of your family members an opportunity to react, perhaps first emotionally, but ultimately more thoughtfully, to the process.
- As children mature and demonstrate they can handle information responsibly, you can begin to share more details as part of the ongoing dialogue.
- We recommend that the conversations be formal and structured, since the issues often involve technical, seemingly inaccessible concepts that can be glossed over in more casual conversation. Formality also reinforces the seriousness of stewarding your assets, history and values.
- At all stages, it is critical to emphasize that the current plan can, and likely will, change, and that any expectations formed at the start may also change. Nonetheless, the conversation should be very open and all family members should be encouraged to offer authentic reactions and ask uncomfortable questions.
- Finally, and not surprisingly, we believe it crucial to have your advisors, along with a neutral family meeting facilitator, present for the conversations. This reinforces the seriousness of the discussion in a safe space and permits real-time clarification of technical issues. It also allows your children to form their own relationships with your advisors.
Summary
As we said at the beginning of this paper, successful wealth transfer is much more than a well-thought-out estate plan. It is an on-going, long-term process based on communication.
Regardless of the form your estate planning takes, taking the time to express your intentions to your family members and advisors can help ensure the successful transference of your wealth to your loved ones in a way that aligns with your goals and objectives.
Perhaps more importantly, it also helps to avoid misunderstandings, hurt feelings, and the loss of love among your heirs and loved ones, and puts your advisor in a better position generally to assist with the successful creation and implementation of your estate plan.