Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning

For most families, the estate planning process is more involved than simply naming beneficiaries. While the primary goal of estate planning is transferring assets in an orderly and tax-efficient manner, it’s just as important to focus on preserving wealth across generations.

Successful transition of wealth from generation to generation is best achieved when family members share a mutual understanding of the overarching use of the family wealth. Although the initial wealth creators have final say about how their assets are distributed, awareness and accord on the part of the receiving family members regarding how the wealth is used can help preserve assets as they move from generation to generation.

Reaching agreement can sometimes be an ambitious task, particularly when family members bring their own perspectives and values to the estate planning process. However, good communication can help head off potential multi-generational conflicts before they happen.

Potential sources of conflict in estate planning

One of the biggest challenges in achieving multi-generational wealth preservation is that each individual and generation holds a different outlook on wealth. Today’s families could include four or even five generations, ranging from members of the Greatest Generation down to Gen Z. This large gap in ages could result in differing perspectives on many topics, including:

· Personal values. Family members may have conflicting belief systems and values, including how they view work, social and political systems, relationships, and more.

· Investing priorities. Some generations may put more emphasis on socially conscious investing than others, potentially creating conflict when it comes to how – and where – to invest assets.

· Shifting economic environments. Older generations who have lived through various economic scenarios may have decidedly different perspectives than younger generations, particularly those just coming of age in a time of high inflation and a slowing economy.

· Communication. Not every generation or family member is comfortable talking openly about money, particularly when it comes to sharing how much is involved and how to spend it.

· View of the role of a financial advisor. Some family members may view their financial advisor as a trusted partner. Others may be more skeptical about the advisor’s role in the decision-making process, preferring to employ more a “do-it-yourself” approach to financial planning.

Resolving conflict and reaching agreement between generations

While differences in personalities, values and approaches to life can create challenges during the estate planning process, it is possible to resolve these differences and reach an agreement about how to best manage the family’s wealth. It starts with creating a plan designed for the long-term, spanning current and future generations. The plan should also be flexible enough to meet the family’s changing needs and shifting economic environments.

How can families create this type of dynamic plan? The process generally includes three phases:

1. Engage in strategic planning. The wealth creators – those passing assets down to future generations – may call a family meeting to discuss their current estate plan and family wealth goals. This discussion may include conversation about how the wealth creator’s assets will be distributed and why the wealth creator chose to distribute the assets in this fashion.

During this meeting, wealth creators can also share their goals for their wealth as it passes from generation to generation. Conveying this information can help younger generations understand the wealth creator’s wishes and become better future stewards of the family’s assets.

2. Revisit planning regularly. Estate planning is never really finished, particularly as families grow and dynamics change. One best practice is to revisit planning as family and wealth circumstances change. If major changes are implemented, communication to those family members impacted can make sure everyone is still in agreement and working toward the same goals.

3. Involve collaborative advisors. Wealth transfer planning is a complex process that almost always requires multiple perspectives and strategies from a team of advisors with multi-disciplinary skills. Best results always come from a spirit of collaboration among attorneys, accountants, insurance specialists, business advisors and financial planners in your multi-generational estate planning conversations.

Fostering a culture of transparency and open communication is crucial for preserving wealth as it is passed to future generations. It is also helpful for resolving potential conflicts regarding distribution and management of assets. Encouraging each family member to share their thoughts and feelings about the estate plan can facilitate dialogue and help reach consensus about the best ways to manage and preserve multi-generational wealth.

At CIBC Private Wealth, we help families create estate plans designed to preserve wealth across generations. Visit our Family Legacy Planning page to learn more.