Marie Caton, CFP®, ChSNC®, AAMS®
Vice President - Manager of Financial Planning Services
[email protected]941.366.7222 x50666
The desire for heads of family to preserve and continue wealth for future
generations face challenging odds. According to studies by Victor
Preisser and Roy Williams, in their book “Preparing Heirs,” almost
70% of family wealth transference and business succession plans fail.
However, it does not have to be this way. With proper planning and
focusing on three key things—communication, documentation, and
initiation—families can strengthen mutigenerational relationships
and increase chances of continued family legacy.
The most essential factor to facilitating successful transference of
wealth is communication. In order to have healthy conversations,
a foundation of trust needs to be established. Ideally, it is advised
to hold family meetings to facilitate these conversations. Ground
rules should be established to ensure every family member will be
listened to and that differences in opinions will not be judged. This
applies not only to younger generations but for family leaders as well.
When families create structured discussions with an agenda or predetermined discussion points, there is less chance of catching a family
member “off guard,” as this allows family members time to process
information beforehand.
Family conversations should be meaningful and include discussions
on the values shared by the family as well as traditions and family
history. Education is a critical component of the conversation.
Education can take on many forms, whether it is basic financial
literacy, an understanding of how family wealth is invested, a better
understanding of the family business, or the philanthropic goals of
the family. For younger family members, understanding their role
and expectations for them going forward will help develop good
stewardship of future wealth and less breakdown in communication
and misunderstandings.
Family meetings have been an integral part of the Rockefeller
family. Twice a year, all family members aged 21 and older, and their
respective spouses, participate in the family meeting. According to
David Rockefeller Jr., “The family talks about its direction, projects,
new members and any other family news related to careers or
important milestones. It’s important that everyone feel a part of the
family, even if they married into it.”
Yet you need not be a Rockefeller to benefit from multigenerational
planning. According to a Cerulli Associates study, “U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2018: Shifting Demographics
of Private Wealth,” aging generations are expected to pass on $68
trillion in assets within the next 25 years. With notable inheritances to
pass on to descendants, a real need for generational wealth planning
exists.
In conjunction with the family meetings, it is important for things to
be documented. I encourage families I work with to memorialize the
key aspects of the family legacy. As time passes, it can be difficult to
recollect information or stories that occurred years prior. Having it
documented provides a gift for future generations to be able to share
with their offspring.
Key discussion points should also be documented, especially related
to estate planning. Estate planning documents include wills, durable
powers of attorney, and advanced medical directives. Families
have evolved from years ago to reflect a modern view of the family
entity, including blended families from previous marriages. With
that said, it is often desirable to have strategies in place to ensure
family wealth flows the way the family wishes. Trusts can be an
effective means to help facilitate desired estate planning outcomes.
Trusts are also helpful with minor children, family members who
need assistance with spending and budgeting, as well as those with
disabilities or addictions. Lastly, a letter of instruction, which is not
a legal document, can accompany a will to provide instruction and a
reflection of personal thoughts and wishes.
Lastly, in the words of the behemoth footwear and apparel company
Nike: “Just do it.” Yet as simple as this sounds, a small percentage truly
give their children a full picture of what they stand to inherit. There
are a variety of reasons for this, ranging from the anxiety of broaching
the subject, determining the appropriate age to have financial
conversations, not wanting to create entitlement, to the stigma of the
discussion of death itself. The impact of not having the conversations
can create negative consequences, such as family discord or even
financial ruin in some circumstances.
Leveraging your trusted partners, such as your Wealth Advisor,
Financial Planner, CPA, and Estate Attorney, can help structure
and facilitate these meetings and conversations. Having guidance
from professionals can help initiate difficult conversations, provide
objectivity, and provide effective and creative strategies that are
appropriate for the family’s specific situation.
With statistics revealing the dismal odds of passing family wealth
on to generations beyond grandchildren, the importance of proper
multigenerational planning cannot be over emphasized. It begins
with conversations that encompass candid conversations around
family values, goals, and objectives. By engaging in family meetings
where education and honest dialogue can be conducted on a regular
basis, the odds ever increase in favor of the family. Leaning on trusted
advisors to help facilitate meetings and conversations, as well as
developing a good estate plan, are crucial steps to making family
wealth last.
Published on March 12, 2021 in the Rochester Business Journal. To see the full version of this column in the RBJ, visit RBJ.net.
CNB Can Help
Have questions about multi-generational planning? Contact me at (585) 419-0670, ext. 50666 or by email at [email protected].
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