5 Steps for Successful Family Wealth Planning

Anna Hays, JD, LLM
Anna Hays, JD, LLM

07.23.19 in Wealth Planning & Investing

Estimated Reading Time: 7 Minutes (1243 words)


Members of Generation X (those currently in their late 30s to early 50s) are often referred to as the forgotten financial generation, with a history of being overlooked as a demographic by the financial planning industry. And according to a recent Investopedia article, millennials (those currently in their early 20s to mid-30s) “face the most uncertain economic future of perhaps any generation in America since the Great Depression.” With $68 trillion transferring from baby boomers to these two groups over the next 25 years, it’s essential that your older clients start thinking about family wealth planning—and that you are ready to support both your existing clients and their children along the way.

Follow these five steps to start productive conversations with your clients and their families that help them develop an effective plan for managing and preserving their wealth into the future.

1) Start Family-Focused Conversations

Helping your client develop trust and accountability among family members is key to building intergenerational wealth. Your client’s children, grandchildren, and other heirs need to understand the importance of family wealth planning and be prepared to take on responsibility to ensure the plan’s success. Discussing the following questions may help your client take stock of family relationships and consider ways to strengthen them moving forward:

  • Who participates in important discussions regarding the family’s values and goals?

  • Who participates in the management of family assets?

  • Has your client communicated his or her intentions clearly, so all family members understand their individual roles?

  • Has your client considered how to deliver plans that may not be in sync with the children’s expectations or goals?

2) Get into the Details

If you have senior clients who have “given some thought” to their wealth transition goals but haven’t nailed down the specifics, the next step is to help them start working through the more detailed aspects of the plan:

  • How much does the client want to leave to children or heirs, and what factors might affect that decision (e.g., maintaining a certain standard of living, ensuring that children aren’t given too much too soon)? It’s a good idea for the plan to create incentives for heirs to learn from their mistakes and establish financial prowess.

  • Is your client part of a blended family that may have potentially conflicting goals? Balancing stepparent support and needs with those of adult children requires thinking outside the box. These days, it’s increasingly common for clients to divide assets into separate family groups and accelerate inheritances, allowing grown children to make more immediate plans for their own future.

  • When (if ever) did the client last review the current plan with the children or heirs? Reading the plan or executed document can serve as a valuable reality check. It can also spark important conversations about the rationale behind planning goals and decisions.

  • Has the client begun to educate adult family members about the duties he or she expects them to take on? It’s vital that heirs understand the responsibilities of an executor and trustee. If family members are charged with overseeing financial and health care matters, they must be prepared to carefully evaluate and potentially make difficult decisions.

  • How are younger children and heirs being groomed to take a future role in family matters and finances? Setting up an allowance and savings plan is a simple way to build a child’s sense of financial responsibility.

3) Plan the Family Meeting

Once you’ve helped your client assess his or her plan, it’s time for the family meeting. These meetings can be an effective venue for reviewing goals and allowing individuals to present ideas. Plus, an open forum allows younger family members to ask questions about the plan, possibly preventing future conflicts or litigation.

Here are some best practices to keep in mind: 

  • Consider setting a date that overlaps with another family event. Does the family get together for the holidays or vacation? Is it feasible to hold an annual family meeting at the end of one of these occasions?

  • Determine who should participate. Will the meeting involve the entire family, including spouses or extended family members who may be affected by the discussions? If your client feels comfortable with you serving as the family coach, you can then help manage any difficult conversations.

  • Choose a comfortable environment that allows open communication, as well as separation when necessary. Treat it as a business meeting that cannot be interrupted by phone calls or other distractions.

  • Encourage your client to hold family members accountable. The success of the wealth transfer plan depends on accountability, and the family meeting is a good time to assess the extent to which various individuals are willing to participate in the plan.

4) Discuss High-Level Strategies

Whether the client has one objective or many, the family should discuss the strategies that will be used to carry out the plan. Here is a high-level list to get the conversation started:

Estate planning. What are the client’s basic estate planning goals? Has the client identified his or her fiduciaries and made his or her wishes clear in the estate documents?

Health and long-term care matters. Has a plan been made to provide for the financial aspects of the client’s health and long-term care needs? Is family asset preservation a concern?

Lifetime gifting strategies. Annual gifts or lifetime gifting strategies can be an effective way to help heirs build financial responsibility. Does the client feel comfortable transferring assets to his or her children, and at what time intervals?

Basis. Whether there will be a basis adjustment is a question to ask with every estate planning solution. Assets retained by the client as part of the taxable estate receive a basis adjustment upon his or her death. If the client chooses to gift or transfer an asset prior to death, the recipient receives the current basis. If the client sells the asset, the client will recognize a gain or loss.

Transitioning the family business. A family business can be the centerpiece of intergenerational wealth transfer—raising complex tax, legal, and financial planning concerns. Which family members will continue to be part of the business and remain committed to its ongoing success? It’s important to consider the business transition in light of global estate planning goals, particularly if there are heirs who aren’t involved in the business.

Charitable planning. Charitable strategies can help the client include future generations in managing the wealth transfer and encourage them to develop their own charitable goals. For example, if a donor-advised fund is in play, discuss charitable initiatives the family will support in the current year and down the road. Each year, different family members can do the research and recommend a worthy charity to the group.

5) Monitor the Plan’s Success

Once all the strategies have been discussed, it’s your job to help keep the plan running smoothly. Encourage your client to take the following steps:

  • Commit to the annual, scheduled meeting.

  • Assimilate individuals’ ideas and opinions into the plan.

  • Continue to define and refine family members’ roles to ensure that the plan is successfully carried out.

  • Address any concerns as they arise.

Keeping the Conversation Going

Building intergenerational wealth is a continual process. Be sure to provide ongoing support and encourage the involvement of clients’ tax and legal advisors, as well as any charities they work with. Most of all, continue to emphasize the importance of family discussions, even after a structured intergenerational wealth transfer plan is in place.

Editor’s Note: This post was originally published in January 2017, but we’ve updated it to bring you more relevant and timely information.

This material is for educational purposes only and is not intended to provide specific advice.

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