Preparing Heirs for Assets

What are the issues? 

  • There is a 70% failure rate to successfully transition wealth from generation I to generation II. (1)
  • Quantitative, estate planning mechanics tend to be the least of the problems.
  • Lack of communication and trust among heirs is the most significant issue, driving over 60% of the failure rate. (2)
  • People are masters of pretense.

Snapshot of the Present?

  • Do you have a comprehensive, fully executed estate plan in place?
  • Has it been reviewed recently to ensure that it is keeping pace with the evolving needs within your family and changes in the tax code?
  • Have you reviewed your estate plan with your children/heirs?
  • Do they fully understand and appreciate your heartfelt intentions and objectives?
  • Are your intentions aligned with your heirs’ values and beliefs?
  • Do you and your children know where the executed documents are filed?

Preparing Heirs for Assets: Exploring the Solutions

  • Do you have a Family Wealth Mission Statement?
  • Have you engaged your family in the development of the Family Wealth Mission Statement?
  • Does your estate plan dovetail with your Family Wealth Mission Statement?
  • Have formal family meetings been held (outside of Holiday gatherings)?
  • Has a family coach been engaged to prepare for the meetings and to facilitate discussions?
  • Spending estate assets to break family trusts is often the one thing on which heirs will agree.
  • Have you educated your family about managing the wealth that they stand to inherit?

Exploring the Benefits of Donor Advised Funds:

  • Donor advised funds provide a strong platform for educating future heirs and rallying consensus.
  • They can be effectively extended into perpetuity.
  • Have you considered utilizing some of your private company stock or other illiquid, low basis assets for making especially tax effective contributions to your family’s donor advised fund?
  • Are you familiar with the latitude your donor advised fund would have for making grants?
  • Have you explored your opportunity to control the investment portfolio?
  • Have you researched how cost effective and flexible they are versus a Family Foundation structure?
  1. (1) Failure was defined as “involuntary loss of control of the assets.”
  2. (2) The Williams Group