In Family Wealth and Succession, Clear Communication Is a Win for Everyone

By Sara Rabi  |  August 30, 2021

In Family Wealth and Succession, Clear Communication Is a Win for Everyone

One of the top concerns of many families with high net worth is how to raise children in an atmosphere of wealth and ensure that they become productive members of society. Many ask: How much do I give my kids and when? How much do I tell them about my wealth? Warren Buffet’s answer to these concerns is, “Leave the children enough so that they can do anything, but not enough that they can do nothing.”

As a panelist at the Opal Group Family Office & Private Wealth Management Forum in July 2021, I helped lead a discussion focusing on family governance and questions of wealthy families, including how to effectively share information with family members about the family’s wealth. The key takeaway from this panel discussion was that communication is critical.

Start Early

It is important to communicate with your children early so they can learn and be trained at a young age and take on responsibility as they get older. They should know what to expect from you and what you expect from them.

Include discussions about why you set up your finances the way you did so they can understand the process. Not talking about money just makes the issues of family wealth more difficult.

Having family meetings to discuss wealth and mission reinforces your values with real life stories and what the place of your family is in the world. You want your kids to have the same fire in their belly that got you to where you are today. This also can ensure that your children, grandchildren and great-grandchildren all know the family history and what it means to you. It will teach them how their wealth was created, who you are as a family and what your family stands for.

It is never too soon to start the conversation with your family members. These conversations and formal meetings should be held regularly. Not talking about family wealth will only lead to future uncertainty.

What About the In-Laws?

As to the question of including in-laws in family meetings the answer is “yes.” These meetings are helpful for the in-law children that are coming into the family group. They are the parents of your grandchildren, or spouses and partners of your children, and you will want them to know the background and values of their new family. A lot of wealthy families like to keep the family wealth meetings to the bloodline only; however, your link to your grandchildren is also through the in-law children. They, along with your children, will teach your grandchildren about family values. You don’t have to invite them to every family business meeting, but you should invite them to some family meetings.

Prevent Surprises

Discussing your wishes during your lifetime and making sure your entire family is aware of them will prevent surprises when the time comes for your will to be read. This is good practice to help keep the family unit together after you are gone. For example, if your wishes are that your younger son take over the family business, this should be discussed and communicated during your lifetime and not be a shock to the family after you are gone. I have seen families split up and in litigation for many years over matters that could have been taken care of by the family patriarch or matriarch during their lifetime at family meetings. Dealing with it before death and communicating decisions to all family members could have avoided surprises and hard feelings and facilitated the family’s acceptances of the deceased’s wishes.

Family meetings encourage participation of the family members and make everyone feel part of the process. If you are appointing one of your children as executor of your estate, trustee of your trust, or trustee of their siblings’ trust, this should also be communicated and your reasoning behind the choice clearly understood. Children who are chosen for such roles should understand their responsibilities and obtain the training they need to perform their duties.

The benefits of discussing the family finances greatly outweigh the dangers of keeping your finances close to your vest. I have known of situations where children were left with messes by parents who never spoke about their wealth. The parents died without a will and stock certificates were found in shopping bags in the basement. We have also had to deal with unclaimed funds and had to retrieve assets that children had no clue their parents owned.

In some cases, the children didn’t know how to handle the new wealth transferred to them and had to be taught from scratch how to manage it. Additionally, the children then had to do their own estate planning so their families wouldn’t have the same issues down the road. Had they been taught at a younger age about their family wealth and its management, this process would have been much easier for them. Learning about it in a more difficult and traumatic way at an older age, sometimes in their 50’s or 60’s, meant they had to deal with major, unforeseen financial issues while also dealing with the loss of a parent.

Being open and honest with your children and family will help them and allow them to help you with your finances should you ever need it. 

About Sara Rabi

Sara Rabi Linkedin Icon

Sara Rabi, CPA, TEP, is a Partner at Marks Paneth LLP. She specializes in individual and fiduciary tax preparation and advisory services. She has extensive experience working with estates and trusts. Ms. Rabi is a member of the Society of Trusts and Estates Practitioner (STEP), which is a leading worldwide professional body for practitioners in the fields of trusts, estates and related issues, and is a designated Trusts and Estates Practitioner (TEP). Ms. Rabi serves... READ MORE +

SUCCESS IS PERSONAL Click here to learn more about our brand