Estate Planning for the Family | Moneta

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For many, estate planning is both a private matter and a gloomy topic—and it’s often something parents and children avoid discussing. These conversations take a lot of courage, and they’re important because they help avoid surprises, encourage better financial planning and promote family harmony.

The importance of making these discussions a priority is especially important for parents who wish to leave businesses or other substantial assets to their children—complicated even more if they would like to see their children jointly own or operate the business, vacation home or other asset.

A recent discussion with a new Moneta client revealed that they have a family business they wish to leave to two children who have worked diligently for many years to make the business a success.  The gift to these two (of their five children) is not to be offset by giving other assets to the other threein fact they are considering splitting the remaining assets equally among all five siblings.  Because the issues are complicated and may be emotions, we suggested a series of family meetings.

The first meeting is to discuss whether in fact the two children/employees want to continue the family business if the parents are not alive. If they do, the goal is to discuss the parents’ expectations.  Although the business has been well run and has great potential, it is struggling, as are many others in this harsh economic environment.  Without engaging in an open and honest family discussion, it’s possible that the children who inherit the business my be resented by their siblings. There may be a sense of having failed if the business is not successful.  Will the children stay too long in a failing business jeopardizing their own families and future, because of a feeling of obligation to their parents?  These questions can only be explored with all of the family members taking part.

Charles W. Collier, author of Wealth in Families (Harvard University, 2001), encourages parents, “…to tell their children the principles that have guided their decision,”—something his own father didn’t do. Although his father’s other assets were split equally, the family’s New Hampshire vacation home went solely to Mr. Collier, a development that left one of his three sisters resentful. The father wanted the house to go to his son, who used it most, Mr. Collier said. So far, he has not been able to appease his sister, and he said he thought she would have accepted this reasoning if it had come directly from their father.

Here are a few examples of how a family meeting may be beneficial, even for traditional families where in the estate will be divided equally among the children.

  • Parents may alter their plans in response to something they learn from their children if they so choose
  • Involving everyone diminishes the probability of adversarial proceedings about intent
  • Parents gain assurance that their children will feel fairly treated and will be able to work together harmoniously if the plans require cooperation (e.g., when they will co-own a family business or vacation property)
  • Parents also gain assurances that the family will not descend into pettiness as they pass their money and possessions to the next generation, and that problems that have existed in family relationships will be resolved—or at least not exacerbated—during their final years
  • Parents and children gain assurances that there are adequate plans for the parents if they become dependent or incapacitated
  • Finally, many parents’ fundamental concern is that their children will assume as their own the values the parents promoted for a lifetime.  Family meetings provide an opportunity to communicate and reinforce those values.

While the final legal documents may not specifically address all these goals and concerns, the process leading up to the creation of the documents results in an estate plan that is better understood by all, more likely to be perceived as fair and acceptable, and less likely to produce hard feelings or legal challenges.

When asked, all generations say the ideal legacy adviser would be one-third lawyer, one-fourth financial adviser, one-fifth accountant and one-fifth therapist/spiritual adviser.  As the Family CFO, your Moneta team brings many of these skills to your family meeting to complement and expand upon the traditional elements of estate preparation.  This collaborative process makes the estate planning process productive for all members of the family and helps avoid post-death conflicts or contests.

Your Moneta Group Family CFO would be happy to schedule a family meeting to help you begin the process of discussing your estate plans. Things won’t get solved in one meeting, but the process can be a great opportunity for your family to start communicating around these complex issues.

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Kara Harmon, CPA, CFP®, AWMA, CRPC

Kara is the professional consultant for David Sadler.