FORMULATING A PLAN AND ENCOURAGING COMMUNICATION
When it comes to building and maintaining wealth across generations, it is vital to formulate a solid plan. At Planning Alternatives, we believe this process begins with candid and transparent conversations. We find that even the most carefully designed strategy can fail if the plan is not clarified and embraced by all relevant family members.
Since 1983, Planning Alternatives has advised clients on how to deal with the challenges of family wealth succession. We have refined our four-phase process and use a direct but empathetic approach to help clients optimize their wealth transfer plans and foster healthy communication. We pre-plan each meeting, gather information and design a strategy which includes a concise action plan with a calendar for implementation. Our wealth advisors are here to help every step of the way.
FOUR-PHASE PROCESS
1. The Initial Meeting – What we cover.
The aim of the initial meeting between the parents and their wealth advisor team is to review and articulate goals. To promote openness and clarity, we advise the first meeting does not include other family members. That way, the wealth advisors can get a clearer picture of the family heads’ wishes before interpersonal relationships, and family politics have a chance to complicate matters. Values and goals discussed in this meeting can include any or all
of the following:
Family
The parents should disclose all family members to whom they would like to bequeath assets. Family members may not necessarily be children; they could also be grandchildren, distant relatives, or even close family friends whom the parents would like included in their estate plan.
Work
Knowing when a transition to part-time work or stopping work altogether helps identify a timeline for income needs and prepare for lifestyle and living location changes.
Expenses
All large, predictable expenses are vital parts of the initial discussion regarding family wealth planning. Examples include down payments for children’s homes or funding the grandchildren’s college education.
Health
The parents should also discuss health status at the initial meeting, as the cost of care has skyrocketed . Part of the financial plan might need to be allocated to healthcare provisions for one or both parents.
Charitable Giving
Charitable giving is a topic that also should be discussed. There may be current obligations with a charity, or the parents may wish to consider donations to one or more charities as part
of their legacy.
Lifestyle
Planned travel, hobbies, and spending habits also have a place in family wealth planning discussions. These affect how much money the heads of the family will need to live comfortably in retirement and, ultimately, how much money they will leave as part of their legacy.
2. Financial Disclosure
Once the parents have completed the discussions outlined above, the next phase is for their wealth advisor team to organize the information. This helps facilitate financial disclosures between parents, children, and other involved family members. It’s important to note, this conversation is often challenging, as many families do not enjoy openly discussing money and wealth. Still, transparency is vital to advancing the family wealth plan.
This disclosure may include the presentation of the parents’ net worth. Funds in all savings, checking, investment, retirement accounts, and other financial products (e.g. insurance or annuity policies) are included. Apart from investments, other information (e.g. credit card statements and titles to assets, including homes and property) needs to be presented. It is important to share contact information for all key professional contacts, so the advisors can help coordinate efforts.
Parents should not feel obligated to provide 100% access to all financial accounts upfront. To ease the transition and maintain some initial privacy, adult children can begin discussions about taking over one or more financial tasks. For instance, offering to help organize bill payments may be a way to start the process of transferring control.
3. Discussion of Incapacity or Death
While often a complicated conversation, discussions regarding potential future incapacity and death are essential for family wealth planning considerations.
As a common example, a family may need to redraft estate plans. The estate plan includes the will, trusts, and the naming of an executor and beneficiaries. Since the original drafting of documents, several personal life events and changes may have occurred. For example, the death of a spouse, an illness, a divorce, the birth of a grandchild (or several of these instances) can all impact estate plans. Changes in estate and tax laws may also require parents to rewrite their will to ensure that assets are preserved, managed, and distributed as intended.
Families may consider designating a power of attorney or allowing an adult child or other responsible family member or friend, to assume responsibility for the execution of the will when the parent becomes ill, incapacitated, or dies.
4. Family Wealth Planning Action List
Once the information outlined above is presented to all family stakeholders, the advisors can craft a holistic family wealth plan with specific implementation steps. This plan could include everything from reviewing succession planning for the family business, to allocating a portion of investable assets to long-term strategies designed to be passed down to the next generation, to updating estate documents to ensure all wishes are memorialized. An action list with a realistic implementation timeline will help intentions become a reality.
Including everyone in the conversations helps ensure that all family members understand the vision and financial goals held by the heads of the family. Though there is no guarantee that family wealth can be preserved, these transparent conversations can foster a more cooperative and harmonious interaction that helps families achieve their financial goals.
READY TO TAKE THE NEXT STEP TO FAMILY WEALTH PLANNING? HERE’S YOUR ACTION LIST:
1.Speak to your advisor to discuss Family Wealth Planning.
2.Gather all relevant information.
3.Schedule an Initial Family Meeting.
4.Identify gaps in communication or knowledge.
5.Planning Alternatives customizes a detailed plan with an Implementation Calendar.
6.Execute the Plan.
HOW PLANNING ALTERNATIVES CAN HELP
Transitions are never easy. Frequently, a family can benefit from the the holistic wealth planning conversations and solutions offered by Planning Alternatives.
Planning Alternatives uses a team-based approach. As a result, you and your family can access the entire firm’s skill and experience to help guide these wealth planning conversations and make these transitions as seamless
as possible.
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