If you don’t have your own network to address the concerns of your advanced planning clients, you may want to bring in a private wealth specialist, as we examined in last month’s column. The private wealth specialist, who has a network of experts who work exclusively with high-net-worth clients, solves the typical planning issues such as preserving wealth for the next generation, as well as atypical, highly specific issues, such as resolving intricate business succession issues, taxation in multiple jurisdictions, valuing artwork, or creating foundations.
The greatest concern of people with money is keeping it. Overall, those with an investable net worth of more than $5 million (minus the value of their primary residence) worry most about protecting the assets they have, according to the 2007 Survey of Affluent Americans by U.S. Trust. Since 84% of survey respondents say their wealth is self made, not surprisingly they want to know more about tax laws, estate planning, and trust funds. This interest in wealth protection flows naturally from their drive for wealth accumulation–and their desire to leave money to their heirs.
Advanced planning clients can wrestle with the best way to transfer assets to their children–as well as their children’s ability to manage those assets (96% in this survey sample believe it’s important to teach their children how to manage money and 61% report that their children are already actively involved in managing their wealth). Estate plans can positively influence heirs’ future behavior and reduce family conflicts–or they can reinforce unproductive behaviors and create poor communication with lasting wounds. Clients will exhibit the range of family dynamics from healthy to challenging. It’s not the job of the advanced planning team to change a client’s personality or resolve decades of conflicts, but solutions can be devised that serve both the parents’ needs and those of the children.
Emotions vs. Wise Planning
Advanced planning clients don’t set out to create problems for their children, but private wealth specialists and family counselors have observed some common false steps. Gary Buffone, a psychologist who counsels families about business succession issues and is the director of The Family Advisory Group in Jacksonville, Florida, has observed four categories:
- Parents plan to distribute money before the children are emotionally ready.
- Parents wait to plan too late, such as the point when one parent is disabled or has died, an emotionally difficult time to navigate with a formal planning document.
- Parents hold on to assets too tightly, even when the children are emotionally mature adults.
- Parents give too much, thereby forfeiting tax savings through multi-generational planning and philanthropy.
The Family Chat
Good communication can avoid many of the potential planning conflicts between parents and children. In their book Silver Spoon Kids, psychotherapist Eileen Gallo and estate attorney Jon Gallo of Los Angeles discuss a well-to-do couple with two young children from their marriage and two older stepchildren from previous marriages. The oldest son was successful and wealthy on his own. The parents told him they were thinking of leaving all of their money to the other three children. He didn’t need the money, so he agreed. Since the discussion took place before documents were signed, there was no resentment later on.