Preserving Family Relationships while Preserving Family Wealth
March 25, 2019
By Jane Beddall, M.A., J.D., is the founder of Dovetail Resolutions, LLC, a Connecticut-based mediation and facilitation firm.
Families usually want to preserve the wealth that they have accumulated and do what they can to ensure it will be used wisely. Sometimes that focus can overwhelm efforts to achieve another important goal: preserving family relationships. We rarely hear about successful family estate and wealth planning; the horror stories of famous, fabulously wealthy families, though, are told, retold, dissected, and held up as cautionary tales. Here are a few ideas families can consider to help keep the peace.
Recognize that planning is a process
Families can be tempted to put off creating a plan or to quickly adopt one just to get it done. Wealth planning is an important process in which families need to consider their specific circumstances and priorities. Periodically, and especially when anything changes in a family’s composition or circumstances, plans should be reviewed and modified as necessary.
Families should start wealth and estate planning as soon as possible. Parents of young children need to have the minimum necessary legal documents in place. Children should be taught from an early age about using money wisely and consistently with the principles valued by the family. Over time, each child’s financial awareness, education, and responsibilities can grow gradually. As children grow into young adults, families should consider changes that are likely to occur. For example, if prenuptial agreements make sense for the family, younger family members should know about them and their purpose before they are involved in relationships that lead to marriage. When these agreements are understood to reflect a family value and not a negative judgment about a particular person, everyone benefits.
As wealth planning evolves to include estate planning, a family can benefit from listening to the voices that should be heard. Making assumptions can be dangerous for drafters, grantors, and beneficiaries – for different reasons. Although decision-makers (especially parents) do not need to be influenced by their children, family harmony can be nurtured by respectful listening and consideration. At times, adult children will surprise their parents when asked: some recognize that the cons outweigh the pros when keeping the family vacation home for the next generation and will dissuade parents from taking steps to do so. Explaining why a decision was made can prevent children from seizing on the painful assumption that a decision was motivated by favoritism, mistrust, or lack of love.
Family relationships can be permanently damaged by failure to address end-of-life planning. All adults, especially as we age, must make our wishes known about what we want and who will have the responsibility to carry out those wishes, in properly executed documents. Those documents must then be accessible when needed.
Decisions must be made, even if it is difficult to do so. An unsigned document is not a plan and almost any thoughtful decision is better than no decision at all. Documents need to be executed in accordance with applicable law. All necessary individuals and institutions must have current copies.
Understand how plans in effect will affect family members
It is important to understand how wealth plans and estate plans will affect the family as a whole and as individuals. Understanding the role of a grantor, trustee, or beneficiary can prevent some problems before they can start and stop others from exploding into crises. Education about these roles, generally, can give individuals in the family a better understanding of the rights and responsibilities associated with them – as well as the limitations.
Specific language in relevant documents can then be considered in the context of individual or family circumstances. Of course, understanding the language of the documents will not necessarily guarantee that those affected will be happy about the meaning.
One way to minimize problems is to try to ensure understanding as soon as possible. Correcting a false assumption is more likely to lead to conflict than establishing an accurate, even if disappointing, comprehension of binding documents from the start.
Communicate sooner, more, and better
The importance of good communication is intertwined with the ideas presented above. The temptation to avoid problems by staying mum is a strong one. It is rarely a wise one to embrace.
Adults in a wealthy family will fool only themselves if they believe that children can be completely shielded from knowing family finances. Much information is available online today, and children have always noticed where their family lives, vacations, and socializes.
Parents should listen to questions and give the most complete answers that they feel comfortable giving. Over time, comfort levels should expand, as young people grow up. Educating children, in steadily increasing complexity, is a better approach than a sudden immersion in wealth or wealth planning.
Stating and explaining decisions can prevent family discord. No one likes unpleasant surprises. If adult children are assuming that parents may help with college expenses and grandparents are assuming that everyone knows that they will not, long-term negative financial and emotional impacts may occur.
Parents will sometimes say that they feel they can prevent conflict at the Thanksgiving family gathering by keeping their planning decisions secret while they are alive. Most will recognize that this approach will often leave a legacy of family strife.
Families should try to communicate with all the love and respect that they can. Even difficult conversations about wealth, wealth planning, and estate planning can be helped by devoting care to how information is conveyed.
Finally, help is available. Attorneys, wealth advisors, trusted family friends, or professional family meeting facilitators understand that each family is unique and also that some challenges are commonly faced. These advisors can help clients to preserve and enjoy family relationships as well as family wealth.