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How to successfully transfer wealth

A few simple strategies could help your family avoid misunderstandings and maintain the integrity of your legacy.

Family bonds run deep — and ensuring that they stay that way can be a key part of your legacy planning. The surest way to do that is to adopt a proactive strategy to forestall conflict before it even has the chance to start. All families can adopt approaches to wealth transfer conversations that foster good will and maintain family ties. The stakes can be high, and the missteps that can cause problems can be surprisingly small.

Dr. Karl A. Pillemer, Professor of Human Development at Cornell University, tells of one young woman who had expected to inherit a vase promised to her years earlier by her grandmother. When the vase went instead to her sibling, through an oversight by their father in his own estate, the other sister held onto her anger, causing a family rift that persisted for years.

Disagreements over seemingly small matters can damage or sever relationships — and frequently money is at the root, says Pillemer, author of Fault Lines: Fractured Families and How to Mend Them. “Often, financial issues are caught up with so many other emotional issues that it can be hard to untangle,” says Pillemer. Small wonder that when parents fail to achieve their wealth transfer goals, a breakdown in trust and communication is the culprit nearly two-thirds of the time.1

Thanks to rising longevity, families today enjoy a blessing of extra years in which to nurture and treasure relationships. The Bank of America Private Bank has resources and experience organizing family meetings and putting routines in place that will help you see that your legacy wishes are communicated – and carried out – in ways that build upon your family’s shared affection for each other. Talk to your advisor, too, about the following strategies.

minimize favoritism

While parents may intuitively know that “playing favorites” is unwise, Pillemer’s research reveals just how damaging that can be. But what’s tricky is that favoritism doesn’t have to be intended, or even real, to cause damage. When parents fail to make clear their reasons for decisions, perceptions or misperceptions can fill the gaps, says Holly Swan, national family office consulting director for Bank of America Private Bank.

This is not to suggest that wealth must be divided equally. “There’s a difference between equal and equitable,” she says. One child may have a disability that requires creating a special trust, for example, or expenses beyond their control. Swan adds, “It’s how parents choose to talk about it, or not to talk about it, that can cause harm.” It may even help in some cases to bring in a third-party to facilitate difficult conversations about how you plan to divide your wealth — something the Private Bank can help you arrange.

share your intentions

To prevent these types of accidental misunderstandings, parents need to think through to whom, and why, they are giving every part of their estate. “Having no plan is, in and of itself, a plan,” Swan says. “It means your children will have to work through all of these things themselves, which can be really difficult for siblings.” Swan suggests working with your advisor and an experienced estate planning lawyer on a comprehensive plan that clearly delineates your wishes and the reasons behind your choices.

And keep in mind that creating the plan is only the first step, advises Jesse Mandell, whole family strategist for Bank of America Private Bank. “Share it with your children,” he says. If you find that conversation difficult, ask your Private Bank team to assist. “It’s easy to stick your plan in a drawer and leave it for the next generation to find,” Mandell says. “But that can cause unfortunate surprises, and you won’t be there to explain.”

consider caregiving needs

Wealth transfer is only one reason for rifts, Pillemer notes; caregiving responsibilities, too, often cause division, especially since women family members, or those perceived as having fewer commitments than others, tend to bear the burden. “Everybody expects them to shoulder the load,” he says.

To help prevent conflicts, parents should make their desires and plans explicit long before the need arises. Simply stating: “I want to remain at home” may not go far enough, Swan advises. “It’s much different if you can say, ‘I plan to stay at home. I understand what the costs will look like for in-house care, and here’s what I’ve done to plan for that.’”

 “When parents are clear on what they want, and we’re able to factor the cost of care into financial planning, that really helps take the pressure off,” says Mandell. “What’s more, having this open dialogue with children about caregiving can be a powerful way to bring a family together.”

Learn how to practice relationship first aid

While you might be tempted to avoid further confrontation after you’ve had a family disagreement, Swan suggests overcoming that impulse. Instead, act quickly to mend a rift or settle a dispute. Indeed, it’s worth trying to restore relations regardless of whether the original rupture dates back five, 10 or 20 years. Even if it feels like dredging up ancient history, openly discussing your feelings and allowing the other person to discuss theirs could lead to a resolution that serves as a foundation for building anew, says Pillemer. “Something may have happened that might sound trivial, but it can spark the whole estrangement.” This also may be a time when a neutral third party could help you air your feelings in a productive way. Pillemer suggests that rather than attempting to repair the full relationship all at once, start with “first aid” aimed specifically at that precipitating event, he suggests.

That said, the best way to handle family conflicts is communication and prevention, says Pillemer — starting early to build strong family relationships based on clarity and trust. After all, says Pillemer: “Our investments in our children and in close family relationships are lifelong investments.”

Speak with your Private Client Advisor about your estate plan and ways to better communicate your intentions to your children.

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