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The power of family meetings

Sharing your legacy plan with those you care about is a critical step, often skipped. Here’s how to make estate planning conversations with your family most productive.

Multigenerational family conversing on couch

SIGNING THE PAPERWORK IS THE EASY PART of setting up your estate plan. What comes before that step (making often difficult decisions about who gets what when) and after that step (communicating those plans with your family) can be emotionally fraught.

In fact, that’s the very reason many people keep their plans under wraps even after they’ve completed their documents. “They might be uncomfortable talking about their own mortality or worry that learning about their family’s wealth could impact their children’s work ethics,” says Holly Harben Swan, National Family Office consulting executive for Bank of America Private Bank. But the price of silence can be steep.

“I encourage families not to make these conversations a one-time event, but to revisit them at least annually.”

Holly Harben Swan, National Family Office Consulting Executive for Bank of America Private Bank

Besides the risk of family quarrels, research has shown that a significant erosion of value can occur when assets are passed from one generation to the next, in part as result of this lack of communication. According to one study, 70% of wealthy families lose their fortune by the second generation.1 “Parents can devise the perfect plan in isolation, but if their heirs aren’t prepared to receive the assets, there is a risk that no one’s life will be enriched,” Swan adds.

Narrow down your plan

Your Private Bank wealth strategist and estate planning attorney can help you think through a number of questions, such as whether to pass on your legacy or a portion of it while you’re still alive and how to structure your estate so that tax consequences are minimized. But when it comes to holding a family meeting to communicate your plans, few people think to ask their Private Bank team to be involved. Yet, having an objective advisor present to lead the conversation and answer questions can help family members open up about their expectations, values and ambitions. Your wealth strategist or another member of your client team can also help make sure everyone understands the implications of their inheritances and help them evaluate the implications of different financial decisions.

The framework below can help you prepare yourself and your family for a productive meeting.

Think about what you hope to accomplish

Before you can think about involving family members in any kind of estate planning discussion, you and your spouse, if you’re married, need to come to an agreement. It’s important to clearly articulate what you hope to leave to your kids and other family members and what you’d like those assets to help them achieve. You should also decide if you want to pass on your legacy while you’re living, an option that’s gaining popularity with older Americans,2 or after you’re gone, as an outright bequest or transfer in trust.

As a prelude to this conversation, gather information about your assets and liabilities. Your Private Bank team can help. Having those numbers in mind can be crucial down the line in helping your family members understand how an inheritance might affect their own financial plans.

“It’s key to avoid putting these conversations off to another day. Put a plan in place, and then go ahead and talk it over with your spouse and family.”

Scott Wagoner, Private Client Advisor with Bank of America Private Bank

Share the ground rules for discussing your plans

For a matter as important as your estate plan, it can be a good idea to set up a series of discussions over time. The idea is to ensure that your children understand your intentions and how your plans will affect them. As a rule, Swan suggests, don’t talk about numbers for the first meeting or two. Instead, start by sharing your thoughts about what the assets you’ve accumulated over the years have meant to you and your family.  “From there, you can talk about the impact you hope your money can have as you transfer it to the next generation,” she says.

For some families, such meetings can present difficulties. Siblings may not get along, and relatives might live across the country — or the ocean. However, meetings don’t have to take place face to face. In fact, virtual meetings can be easier to schedule, and the physical distance can help remove some of the emotions, notes Swan.

Family engaged in lunchtime meeting.

Don’t avoid tough questions

While parents will ultimately decide how and when to transfer their wealth, it’s important to address upfront any potentially controversial provisions, especially if the assets include a family business.

Swan worked recently with the founders of a successful timber company.* One of their four grown children wanted a career there and had spent years learning the business from the ground up. The other three found themselves drawn to other paths. The couple created a succession plan for one daughter to inherit all of the company’s voting shares, while the others will receive equivalent nonvoting shares with the option to sell their shares for fair market value.

Swan helped arrange a family meeting to communicate the parents’ intentions. Explaining the reasons behind the decisions helped reduce the potential for misunderstandings between the child working for the company, who had helped devise the succession plan, and her siblings, she says. “In addition, this provided each child with a clear picture of the financial support they will receive during the parents’ lives and after to help them formulate their own plans.”

Take steps now

Scott Wagoner, a private client advisor with Bank of America Private Bank, recalls working with a gentleman in his 70s who became ill before having the financial conversations he’d long planned to have with his wife and their teenage children. “He didn’t want the kids to come unprepared into wealth and make the same mistakes that their older stepbrothers and stepsisters from his first marriage had made,” says Wagoner. Shortly before passing away, he asked his spouse and his business partner to work together to ensure the kids received money at appropriate times and were educated about the responsibilities of wealth.

At the family’s request, Wagoner’s team helped establish trusts with the surviving spouse and business partner as trustees so they’ll be able to distribute money at the appropriate time, and worked with the heirs on the fundamentals of money management and philanthropy. While the deceased’s wishes have been fulfilled, he would have wanted to oversee the process, says Wagoner, who encourages families to act sooner. “Avoid putting these conversations off to another day,” he suggests, “Put a plan in place, and then go ahead and talk it over with the people you care about.”

Even after all the paperwork is done, think of this as an ongoing conversation, says Swan. “I encourage families not to make these conversations a one-time event but to revisit them at least annually.” Swan suggests. “For a lot of kids, these are new concepts, so hearing it once won’t necessarily do the trick,” she adds. Plus, things change, and each time you meet, chances are you’ll come closer to capturing your vision for empowering the next generation.

* Names and identifying characteristics have been changed to protect privacy.

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