From the April 2011 issue of Investment Advisor • Subscribe!

And the Pass Is Incomplete

Baby boomers are scheduled to inherit $8.4 trillion from their parents—but don’t expect it all to go smoothly

It’s wonderful to see so many billionaires pledging to share their wealth with charity. From Bill Gates and Warren Buffett to Star Wars’ George Lucas, New York Mayor Michael Bloomberg and Facebook’s Mark Zuckerberg, these moguls may not only help make the world a better place, but avoid some of the complicated family issues that inheritances engender.

At times, clients planning to pass their wealth (or not) to family members may need your help to step back and reflect before they cause misunderstandings, hurts, resentment and anger. Here, for example, are some scenarios that call for serious and creative deliberation.

Q: My widowed client has provided financial help to her children and grandchildren for years. Now grown up, they ignore her unless they need her to bail them out of scrapes. Feeling “enough is enough,” she recently drew up a new will that bypasses her irresponsible progeny. I’m uneasy with her decision to hide the new will’s provisions from the kids and grandkids. Should I encourage her to reconsider?

A: Not necessarily. But you do need to educate her about the tremendous psychological and emotional damage she may cause if she makes these changes in secret.

Perhaps you can help her explore any memories she has of better times with her kids and grandkids. An ethical will in which she states her wishes for them (if she has any wishes that are positive) may help provide a degree of healing.

You might see if she would be willing to meet with the kids and grandkids to talk about their relationships (or lack of relationships, in this case) and communicate her decision about her money. She could get together with each generation separately, if desired. If the meetings are in your office, you might also consider inviting a family therapist to help you ease tensions.
 
Q: A client couple has had several heated discussions in my office about philanthropic giving. I suspect the husband feels expansive about giving away their wealth because he grew up in a family where he always felt there would be enough money. By contrast, his wife’s parents had to scrimp to raise her and her siblings. Her view is that her and her husband’s wealth should be devoted solely to their family. Is there a tactful way to bring this couple into balance?

A: I’d meet with each of them separately to explore their family history around money and legacies, as well as their beliefs and preferences about where their wealth should go.

In these individual sessions, I would also invite each client to try to understand the other spouse’s point of view. For example, the wife may want to provide well for herself and her family to make up for feelings of deprivation from her childhood, but you can ask her if she admires her husband’s willingness to help people he doesn’t even know. If the husband feels his wife is being selfish, reflecting on her upbringing and her fears may help give him more compassion for her.

Once you listen empathetically to each spouse, you can bring them together again in your office. Encourage each of them to play back what the other says, adding what makes sense about it from the speaker’s perspective and what else the speaker might be feeling.  

Q: I recently helped my wealthy client establish a foundation and develop an endowment strategy. Like Warren Buffett, he believes in not leaving his kids a big inheritance. One of his daughters is fine with this, but the other daughter and his son are resentful and angry. This is a source of pain to their father, who has asked me how he can get the discontented duo on board with his philosophy. I would appreciate your suggestions.

A: This decision is ultimately the father’s, of course, but the better his children understand his motives as well as his desire for each of them to flourish, the easier it will be for them to make peace with it.

I would suggest that the father plan to meet with each of the three children to explain why he feels strongly about not passing on substantial wealth. He should be prepared to make himself vulnerable in sharing his emotions, and allow as much time as each session takes. Encourage him to be sensitive to each child’s feelings about their relationship. Does the daughter who accepts his plan feel more loved and supported than the other two?

Your client also needs to take ample time to let each of the discontented children explain the reasons for their unhappiness. Do they see a large inheritance as an expression of his approval or his love and support, which now would be denied them? Perhaps he can find a better way to support these two than to shower a large sum of money on them.

After these one-on-one discussions, it might make sense for you to meet with the whole group (including the children’s mother, if she is still in the picture). You might consider collaborating with a family therapist if you anticipate further conflict.

Before this meeting, and perhaps even before your client meets with each child, you might urge him to write or record an ethical will. In this enduring message, he can share his life lessons, his blessings and desires for his children, and his philosophy of wealth and financial legacy.
 
Q: My client, a Singapore-born entrepreneur now in his 60s, recently sold his business for several million dollars. When we discussed updating his will to distribute this wealth, he shocked me by saying that he no longer wants to divide his estate equally between his twin children. He has decided that the boy should inherit twice as much as the girl, based on evidence that women have brighter economic prospects and are more likely to be economically supported by a spouse. As a woman, I feel especially sensitive to the unfairness of his decision. How can I get him to think this through more carefully before changing his will?

A: I should disclose my own bias upfront: I believe leaving different amounts to siblings, no matter what the reason, has the potential to thrust them into a war zone charged with feelings of hurt, anger, guilt, greed and betrayal.

As a woman, I’m also aware that despite the recent gains women have made in education and the workplace, we have been seen for centuries as less competent, less valuable and less important than men. I think your client’s proposed decision risks stirring up these age-old memories for his daughter.
To complicate the picture, I am also a firm believer in advisors helping clients to reach their own conclusions, not in telling them what you think they should do.

With all that in mind, I would suggest telling your client something like this: “Changing your will in this way could result in unforeseen emotional or psychological consequences for both your children. Treating twins differently, when they often feel so deeply connected, can also be a risky strategy. Would you be willing to try a simple exercise to help clarify what the effects might be?”

Assuming he agrees, try a role-playing exercise where you play the father while he plays first one child, then the other, responding to the possibility of this change. If it sounds like he’s in denial about the risks of his plan and is sugar-coating their imagined reactions, you can switch roles and play the siblings yourself. Make notes of the potential problems and benefits of this lopsided legacy that surface during and after this process.

If your client still feels committed to his plan, ask him to consider one final step before he sees his attorney: telling each of his children what he is thinking of doing. The danger is that if his daughter is susceptible to feeling rejected, abandoned, unloved or not valued, simply broaching the possibility of an unequal inheritance might create a rift even if her father later abandons his plan. For this reason, I think it would be best for him to start with his son. If the boy is uncomfortable with the idea, your client may decide to jettison it without needing to upset his daughter.

When families come together over wealth transfer and legacy, pent-up emotions—needs, hurts, fears and angers—can spill over. With the support of your own sensitivity and expertise, assisted as needed by therapists or counselors, you will be able to help more families heal and prosper.    
 

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