Waiting for the right time to talk to your kids about their expectations regarding the family wealth? The holidays can be a natural time to have meaningful conversations, when everyone is together and in the holiday spirit. Many families avoid these conversations because they just don’t trust that it will turn out well, or they’re not sure how to get them started.
Rather than risk hurting someone’s feelings or opening Pandora’s box, most families hope their estate plan will manage the conversation for them. Unfortunately, great governance is not the same thing as having great relationships. Great relationships have high levels of trust and communication.
Learning how to have challenging conversations regarding wealth transfer before it is too late will make the difference between a successful wealth transfer, with the family remaining unified and in control of the assets, and an unsuccessful wealth transfer.
How to bring up the topic
Here is a simple three-step process for starting this important dialogue:
Invite your family members to the conversation. You can say something like, “I’d like to hear your thoughts on how our wealth will benefit our family and future generations. Are you interested?” By inviting them to the conversation, you are engaging them on their terms and letting them know their voices matter to you.Be clear about why you want to have the conversation. This will set a context for them to align with your intentions for the conversation and keep the conversation on track. That might sound like, “I’m curious to hear your thoughts about how you see this wealth impacting you” or “The purpose of the conversation is to hear your perspective and help me ensure the wealth is a force for good in our family.” A shared understanding of the purpose allows everyone involved to contribute ideas that build on each other and generate innovative solutions.Actively keep the conversation inside the rails. The topic has a lot of opportunity to produce more questions or segue into other areas, such as how much money will transfer or what the plan is for the family business. When these topics or questions surface, remind family members of the purpose of the conversation. You could say, “Those are great questions, and I’m very interested in hearing your perspective. It will help me think about some of those issues. Let’s focus on the big picture for today.”
Five questions to ask
Here are five great questions to ask during the conversation:
What would you say is the purpose of our wealth?
What does the word “wealth” mean to you?
If you were going to donate money to help others, where would you give it? Why?
What does our family need more than anything else to be prepared for this wealth transition and to maintain harmony when the wealth transfers?
If you wanted to play a bigger role in making sure our wealth is a force for good in our family, in what way would you like to contribute?
Your job is to ask questions and listen. Asking good questions requires that you are genuinely curious about other people’s perspectives, as opposed to telling them yours.
If you find it challenging to come up with good questions, ask yourself if you have shifted the focus off your family members and onto yourself. When you find yourself doing all the talking (or explaining, defending, opining), you might be missing the opportunity to hear what is really important to your family members. Stop talking, challenge yourself to listen and choose to ask another question.
Once the conversation is complete, thank everyone for sharing their perspectives and the value they brought to you.
Prepare your heirs
Unprepared heirs is the number one reason why wealth transfers fail. In these situations, expectations are not clear, and the family avoids discussing how their wealth will impact their lives. Heirs are sometimes confused because they grew up with an abundance resources and do not know how to contribute to the family wealth.
To prepare your heirs, you need to understand their unique skills, as well as their level of interest in participating in the family business.
Our founder and acknowledged Dean of Post-Transition Planning, Roy Williams, was a former NFL player and often used a football analogy to describe the situation. Here is what he said:
The executor (center) of the team calls the plays for the lawyers, CPAs, financial advisors and heirs (offensive line players). The executor needs to know the skills of each player to know what to do and what plays to call to be an effective leader of the team. To be successful, the heirs (the receivers) need to know the pass patterns. But too often, they have never run a receiver’s pass pattern or caught a ball (run a business or fulfilled a role), nor do they know what the mission, goal or purpose of the family wealth is. Suddenly, family members find themselves in the game, playing against world-champion defensive players such as Ponzi schemes, dishonesty and the interference of well-intended family friends.
To make sure your family’s wealth transfer is among those that succeed, your heirs need to be prepared for the impact wealth will have on their lives and also for the transition of that wealth. They need to understand what your vision is for your family’s legacy. All this requires open, effective communication.
There is no time like the present to start to prepare the next generation. And we say there is not time like the holidays to start the conversation!