David Bokman
Managing Director
Co-Head of Ultra High Net
Worth Resources

Glenn Kurlander
Managing Director
Head of Family Governance and Wealth Education

Families that have achieved exceptional financial success tend to surround themselves with sophisticated advisors. Most of them work with a team of highly skilled accountants and estate attorneys, frequently setting up an elaborate labyrinth of trusts, limited partnerships and life insurance strategies. Such families often have artfully conceived and technically sound wealth transfer plans, and the significant legal and accounting bills that go along with them.
So, what could be missing?

Consider the human element

Having worked with hundreds of ultra high net worth families over the past decades, we have seen an extraordinary array of elaborate and intricate strategies. While we occasionally see plans that are out of date, insufficiently customized to the needs of the family, or flawed in some technical respect, the vast majority of them are well-considered and precisely crafted. Where many fall short, however, is that they tend to take a rather one-dimensional view of family legacy and overarching family values. They focus almost exclusively on quantitative issues, such as taxes, fees and investments, while paying little attention to the more challenging interpersonal considerations. While such plans can protect and transfer assets, they may do little to preserve important family values and promote family harmony. Ultra high net worth families are not composed of investment accounts and trusts. They comprise people with all of the affections, fears and resentments that underpin all human relation- ships—all playing out under the stress of dealing with complex challenges less wealthy families seldom have to face.

Identifying the issues

We have all read too many stories about prominent families disintegrating into squabbling factions over perceived slights and unmet expectations.

By the time that parents, siblings and cousins are only speaking to each other through their lawyers, these situations are extremely difficult to rectify and are inevitably damaging to everyone involved. Even those who win in court often have lost more than they have gained. And, of course, the cost isn’t measured only—or even principally— in dollars, but in lost relationships that no amount of money can repair.

In our experience, the best way to protect your family from such torment is to expose and address potential sources of strife as early and as often as possible.

So, what are these issues? Of course, the specifics are unique to your family, emanating from your personal histories together. That said, many ultra high net worth families do share common stresses and concerns that can lead toward family conflict.

We think it’s helpful to group these issues into three categories: Shame, Resentment and Fear. You may want to consider whether some of these issues are blocking you from engaging fully in the most productive wealth planning process and, more important, limiting the prospects for continued peace and harmony in your family.

Balancing opportunity and obligation

A comfortable relationship with your financial situation begins with the acknowledgement and acceptance that your wealth gives you opportunities which others don’t have, but it doesn’t endow you with omnipotence. It’s common to struggle with the difference between the opportunity to help and the obligation to do so, and to realize when one crosses over into the other. It’s a natural temptation to shield children from awareness of family wealth so they can enjoy a “normal” childhood, but is that really the best thing to do? Is it even possible? Many feel like they should have all the answers, when they may not know all the questions, and those who inherit their wealth often struggle with questions of whether they fully deserve it. Perhaps you or your children have even asked themselves questions like:

  • If my parents don’t talk to me about money, does it mean they’re embarrassed about how they accumulated it? Or does it mean they don’t trust me?

  • How should I respond when my friends, or even my cousins, ask for details about our family’s wealth? Or when they tease me about it?

  • Does it make me seem selfish if I don’t donate to every charity that asks? Why is it so hard for me to just say “No”?

  • Do others at work think I only got this promotion because my uncle owns the company? Did I?

  • Is my inherited wealth any less legitimate than my spouse’s W-2 income?

  • Will financial planning require me to revisit some of the embarrassing mistakes I’ve made with money in the past? (Or mistakes I’m still making?)

  • How do I tell my advisors I really don’t even understand what they’re saying?

Achieving a shared sense of fairness

Resentment invariably springs from the sense that one is not being treated fairly; in other words, that what one gets is somehow less than what one is due. This gap can take many forms in ultra high net worth families: an unfair share of an inheritance, a less influential role in the family business or family foundation, or perhaps a lack of simple respect. Paradoxically, it can also be engendered by the sense that a family member has been given more than she or he is due: greater burdens or responsibilities, additional complexities and the weight of history or tradition. Outside the family, there can also be issues surrounding the expectations placed upon ultra high net worth family members by less affluent friends and associates. There is no magic cure for disagreements over how family resources should be allocated. However, effectively communicating what each family member can expect and the rationale behind critical family decisions is a very good place to start. Perhaps some of these questions have arisen in your family.

  • How can my parents insist I have a prenuptial agreement when they never had one themselves?

  • Is it really fair for my parents to give equal annual gifts to all the grandchildren, when my sister has four children and I only have one?

  • Why do my brother and I share equally in the estate plan when my parents have already spent hundreds of thousands of dollars on his failed business ventures?

  • Why do my friends always expect me to pick up the check?

  • Must I really keep supporting the causes that my grandfather supported?

  • Is it right for the church to ignore my suggestion for the new pastor when I just gave them a large contribution?

Mastering fears

Fear comes in many forms, some useful and others harmful. The fear of market volatility may prevent you from foolish speculation, but it can also push you toward unduly conservative strategies. The fear of burdening children may lead to a lack of communication and preparation. It’s a big, complex world out there and, no doubt, there is much more to fear than fear itself. It is, however, vitally important to understand the nature of your worries and explore whether they are preventing you from making decisions that actually may increase family security. Maybe you have even asked yourself:

  • How could this plan harm my relationship with my children? My spouse? Others?

  • If I tell my children, or even my advisors, the true extent of my wealth, will someone else find out and use it to harm my family?

  • Will the mere knowledge of the fact of my wealth hurt my children by destroying their drive and initiative?

  • Will leaving my estate to my children isolate them from their peers (or cousins)?

  • If I donate the majority of my estate to charity, will it turn my children against me?

  • Suppose I give too much away and then can’t support myself?

If I discuss my estate plan with my children today, will I have to and concerns should be an integral part of that conversation. You simply should embrace the very human reality that emotions like shame, resentment and fear affect everyone. If you can understand the wellspring of these emotions, you can bring important issues out of the shadows where they can be understood and resolved. To get the process started, take a moment to consider the following:

  • How do my attitudes toward wealth reflect those of my parents? How do they differ?

  • What blocks me from sharing my deeper fears and concerns with my family and my advisors? Why?

  • What are the gaps in my family’s basic wealth management knowledge?

  • In my own?

  • What would my estate plan look like if I didn’t worry about what anyone else thought? How about my charitable giving?

  • How would I describe my personal wealth management mission statement? How would it compare to my spouse’s? My parents’?

  • My children’s?

Working toward solutions

The most successful plans, of any sort, tend to be those that begin with the clearest definition of the goals and obstacles.

As Stephen Covey wrote in “The 7 Habits of Highly Effective People,” “Begin with the end in mind.” If one of the core goals of your wealth planning is to sustain and promote family harmony, conversations cannot be limited to trust structures and investment strategies alone. It’s important to at least consider the emotional dynamics that influence your own decision- making, and that affect your capacity to build an enduring legacy together.

These are important topics to consider. If you would find it helpful, ask your Advisor to bring in one of our experts in family dynamics to facilitate these conversations. These discussions may feel a bit awkward in the early stages. We have seen, however, that they are almost always productive. We believe that the only truly successful plans are those that result in strong and successful families. Taking a moment to discuss what that means to them is always time well spent explain why I make changes in the future? Suppose I want to leave more to charity?

Taking inventory

No one can make all of her or his important family decisions rationally and dispassionately. The intent should not be to remove your passions and concerns from wealth planning discussions. In fact, those passions there is no magic cure for disagreements over how family resources should be allocated. However, effectively communicating what each family member can expect and the rationale behind critical family decisions is a very good place to start.

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