Keep the Peace, Preserve Your Wealth

Numerous studies have claimed that the greatest wealth transfer in history is underway, with a staggering $36 trillion expected to change hands over the next 50 years.1
What those studies don’t show is how many of those wealth transfers will be successful.

The fact is that wealth transfer can be much more complicated than people realize.
Some family members may have competing interests and values, which can lead to disagreements upon the passing of another family member. For instance, siblings may be inconsistent in their views on money or how they will use their inheritance once their parent(s) dies, leading to years of fighting.

Wealth Transfer - fighting and communication

Think about your own family: if you have disagreements about money now, what will happen when you pass away? Will your children fight over the biggest “chunk” of the inheritance pie? The good news is that you can take steps today to reduce conflict in the future and help ensure a smooth, successful transfer of wealth. Here are three helpful steps:

Determine Your Wishes

Estate planning may not be an enjoyable topic to think about, but it is important, even when you’re young. You never know what could happen in life, so you must be prepared for anything and everything. And if you haven’t started yet, don’t worry — it’s never too late to get a plan in place.

When coming up with a plan, there are a number of questions you should consider: how do you want your wealth to be used in the future? What would make you happy? Who will receive your wealth? Will it be fair or equitable in your mind? Do you have charitable intentions? Do you own a business that will be sold or run by heirs?

Once you’ve explored these questions, think about how you really want the money to be used. Remember that this is your decision. When you have a vision in mind, be sure that your heirs and family members are also clear about your intentions, and revisit the plan as needed. Confirm that it always meets your needs and expectations for after you’ve passed.

Now that you’ve developed a framework, how do you put the plan into action?
This leads me to my next point…

Consult Professional Advisors

To ensure that the transfer is as streamlined as possible, it’s important that you designate appropriate, qualified professionals to cover key roles in the process.
Here are three professionals you’ll want on your team:

Financial Planner: A Certified Financial Planner™ (CFP®) can help you understand the wealth you have now and what you might have in the future. If you’re a thirty-something with a great job and your head on straight, you might amass something much greater in the future. If you’re 80-years-old and enjoying your retirement, a planner can help you assess the value of your estate (whether it’s increasing or declining), what you’ll have at the end of your life and what you might leave to your heirs. Mapping out your current and future financial plan will help bring your entire financial picture together for transfer.

Estate Planning Attorney: An estate planning attorney can help you select the appropriate documents to get in place and draft the language needed to carry out your wishes. A few items that could be useful, depending on your situation, are wills, trust agreements, powers of attorney and beneficiary designations for your retirement accounts.

Certified Public Accountant (CPA): Your CPA may have some ideas of how to carry out your plan in a tax-efficient way. If you’re charitably inclined, they can also help you decide what might be a good idea for giving now or share ideas for building your charitable intentions into your plan for after you pass.

You should also coordinate a joint meeting with your financial planner, estate planning attorney and CPA to make sure everyone has a good grasp of the plan. Here are a few more estate planning tasks you can check off while you get your plan in place.

Communicate the Plan and Update as Necessary

Even if you do all the right things to plan and prepare for a wealth transfer, it’s common for many families to miss one of the most crucial aspects of the process: communicating the plan. In fact, about 60 percent of failed wealth transfers are linked to poor family communication.2

How can your heirs execute your plan effectively if they do not know it exists? They need to have a complete understanding of the wealth that they will (or will not) receive, so they aren’t blindsided at your passing and can avoid a family feud.

One of the most effective ways to communicate your wealth transfer plan is to hold a family meeting. This could take the form of one meeting in which you explain your wealth transfer plan in detail, or it could be quarterly or annual meetings to help your family fully absorb the plan. These meetings can allow your heirs to take ownership of the plan and hold them accountable for what is to come in the future.

Family meetings may also include your professional advisors. Having your advisors present can be especially helpful in explaining any complicated strategies that will be put into place now and in the future. They can also help you educate your family about your values and attitudes regarding money, and support your heirs in creating their own goals for the future.

Lack of communication can increase the risk of your heirs misunderstanding or misinterpreting your wishes and not carrying them out as you choose. It might not be easy, but getting everything out in the open can go a long way in ensuring a successful transfer.

One last reminder: remember to update your plan and beneficiaries each time your life or situation changes. Be transparent and keep everyone up-to-speed.

All in all, family fights aren’t completely avoidable. But if you prepare in advance, you may be able to lessen the severity and make the wealth transfer process easier on everyone over time.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Megan Olson
Megan Olson

CFP® | Financial Advisor

Megan Olson, CFP®, is a financial advisor serving clients in the Twin Cities.

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Keep the Peace, Preserve Your Wealth

time to read: 4 min