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Pushing Wealth Transfer Plans Into The 21st Century

What’s wrong with traditional wealth transfer planning and what to do about it.

Among affluent families, the disconnect between what their current wealth transfer planning does, and what they want their planning to do, is staggering. While 75 percent of wealthy parents say it’s important to leave an inheritance to the next generation, only 20 percent agree strongly that their children will be prepared to handle the wealth they receive. Although 54 percent of the wealthy believe their family would benefit from developing a formal set of principles to guide the purpose and meaning of their wealth, only 10 percent of them have done so. And, while the affluent are looking for customized solutions, fully one-half of them think that their current estate plan is too complicated.

Traditional Planning

Traditionally, estate planning has been asset focused, and as a result, it rarely considers the individuals, personalities and unique dynamics of each family. It’s based on a linear way of thinking; that is, if transferring some wealth is good, it follows that transferring more wealth is better. 

In addition to being asset focused, traditional estate planning is too often generic, resulting in a cookie-cutter approach. Estate-planning software has only exacerbated this issue. All too often, estate planners focus on transferring financial resources using the alphabet soup of GRATs, DGTs and SCINs without contemplating how to transfer the values that helped create that wealth to begin with — like gratitude, wisdom and determination.

A New Kind of Planning

Estate planning that’s designed and intended to meet the demands of the 21st century should look and feel different from traditional planning. First and foremost, it should be beneficiary-focused and more concerned with preparing future generations to maximize their own potential than about transferring financial wealth for the sake of the wealth.

Second, it should be customized and based on the specific goals, values and beliefs of the client. A multigenerational wealth plan can’t be built on outdated assumptions. The planning needs to recognize that families are unique, and their planning should also be unique. Only after you know the goals will you have the ability to know when and how to use the tools.

Third, it should be purpose driven. Trusts, limited liability companies, charitable strategies and other wealth-transfer devices should be seen as nothing more than tools to accomplish the family’s goals. The key to being purpose driven is to focus on what provides for family continuity and not just on what provides for financial continuity.

Finally, because a family changes over time, the plan should include regular conversations as well as maintenance and updating to stay relevant and effective. While a plan may be up-to-date for any given period, it’s never completed. An effective plan should be consistently reviewed and updated as new family members enter the picture, individuals age, desires change and Congress changes tax laws.

How to Retool

  1. Expand the team. A mutidisciplinary approach typically involves the financial advisor, attorney and accountant working together to develop the best plan possible for a client. Although each professional comes from a different perspective and typically has different skillsets and abilities, ultimately each tends to be focused on financial issues and technical solutions. In addition to these professionals, families should strongly consider adding a professional family consultant or coach. A qualified family consultant or coach can help a family identify its values, develop a family motto and mission statement and identify non-financial issues that need to be resolved. Without an independent, trained family consultant or coach to assist, families are left on their own to try to develop a plan and accomplish something that they’ve likely never done before.
  2. Break the silence. Although attorney-client privilege is one of the hallmarks of a client’s relationship with his estate planner, that confidentiality and accompanying silence often extends to the beneficiaries and, too frequently, cause significant problems. 89 percent of beneficiaries who knew details about their parents’ estate planning prior to their parents’ deaths report that they were very or extremely satisfied with the process of distribution, versus 65 percent of those who didn’t know the plans. Not dealing with sticky issues and complexity during life leads to a lack of family cohesion, broken relationships and even litigation. It’s critical that families address these issues while parents are still living as opposed to waiting until after they die.
  3. Add purpose to the planning. Nine out of 10 affluent families say that their estate plans didn’t deal with their goals, wants and objectives. Before starting to draft any estate-planning documents, consider helping your client and his family draft a vision statement, a mission statement and a family charter. Creating a vision statement isn’t a new concept, although the term is a more recent concoction. They’ve been used by families and groups for centuries to inspire, keep focused and bind them together. A mission statement, on the other hand, sets out how your client is going to achieve his vision. It’s more practical and focused on what your client does and how he does it. Once vision and mission are complete, the family should also develop a family charter to address issues such as education and development, how conflicts will be resolved and decision-making practices.
  4. Ask Technicolor questions. When interviewing a client about his estate-planning objectives, start by getting a flavor for who he is, what he believes and the details of his family. These questions could include asking the following: Describe your children and their passions, interests, struggles and triumphs. What’s your money for? What’s one piece of advice that you would like to pass on to your heirs? What’s one thing you would leave as a lasting legacy to the next generation? Looking to the future to a family gathering 30 years from now, what would you want it to look like?

Holistic wealth transfer and family continuity planning should be the goal of estate planning. The best plan is one that ultimately is less interested in helping the next generation become rich and more interested in preparing them to manage, sustain and carry on a rich and cohesive legacy.  


This is an adapted version of the authors' original article in the May issue of Trusts & Estates.

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