Prepare the heirs

I recently attended a workshop at which the three professional women were informing and educating attendees about the advantages of initiating estate management, proactively. There were 50 attendees, most of whom in pairs. All concerned for the future due to family or business circumstance.

The three presenters represented different professions. Law, accounting and financial planning. What was good? ; The level of interest and the feedback ratings. I’m sure this was in no small way due to the three professionals working in unison and being strongly aligned in their thinking.

It got me thinking about my own family and our experience pre and post our parents and grandparents deaths. We discussed Wills, Trusts and Enduring Powers of Attorney even less than we spoke about who they voted for every three years. At least I can remember some conversations around Michael Joseph Savage, Fraser and Holyoake and the hush as we listened to Nordmeyer presenting his budget on radio. But we never discussed intergenerational wealth transfers or multi generational wealth transition. I’m sure ‘farming’ families would have been more open and communicative but we didn’t and I’m sure we were not alone.

We know there is a correlation between life insurance and the acts of thinking, writing and signing a Will. Life insurance is about providing for those who matter most when you no longer can. The intent of a will is the same – it’s a document designed for the benefit of others. The very act of writing a Will should not be a solitary endeavour; the document should be drafted in concert over time, born from family conversation. In short a Will should be about preparing heirs. Advisors can improve the success of intergenerational wealth transfers by encouraging annual family meetings to discuss the family legacy. But they seldom do. Our clients circumstances change all the time – they marry, separate, re-partner, have children, inherit, move overseas. All of these changes can have an impact on their estate plan and consequently it needs to be regularly reviewed.

• Wills are automatically revoked on marriage but are not revoked on entering a de facto relationship, on separation and on having children.
• Trusts are often set up with a particular family structure in mind, if this changes the Trust structure may also need to be changed.
• Moving overseas will often have tax implications, these need to be understood before the clients move, and often changes are required as a result, particularly if there is a Trust.
• Changes in the assets and their status (from a relationship property perspective), may also necessitate a change in the plan.
• Enduring Powers of Attorney in relation to both property and personal care and welfare are essential, not just good to have. Loss of capacity means a family member will need to apply to the court for the appointment of a property manager and welfare guardian. At a cost.

Effective intergenerational wealth management is much more likely to be achieved if the next generation know about the plan, and are involved in the process – especially as change occurs.

• Having Mum and Dad explain the rationale, and address the issues while they are alive greatly reduces the likelihood of disputes.
• If the next generation know what the plan is they can help manage accounts, understand investment management, become a trustee when the time comes.
• Bring new ides and ways of doing things that add real value.
• If there is a Trust and the children are beneficiaries, they are entitled to certain information about the Trust.

There is a current trend for parents to disinherit their children, either by skipping a generation and leaving money to their grandchildren, or by leaving all of their wealth to charity. Many parents make assumptions about financial need. They see that their children have jobs and homes and take vacations, and they assume they don’t need the money. This is causing all sorts of complexities and undermining parent – child relationships.

It is the role of advisers to start conversations – between family members, not necessarily about finishing conversations and having all the answers. It is out of family conversations that insurance and estate management presents itself as an idea that can bring families together to honour a lifetime legacy of hard work and a promise for a brighter future.

My thanks to Matt Hay “Succeed Legal” much of this material is from his Top 10 Estate Planning Tips.