Estate
Planning with Family Relationships in Mind, Part II
The value of family meetings to think about how to transfer a business to the next generation.
In
a previous article we discussed how in the “Perez” family had never
discussed the patriarch’s Estate Plan, how the business was left to his wife and four children which
eventually ended up in a legal battle for control of the business.
Four years after the patriarch’s death, the two sisters and the
mother who had never worked in the business were insisting on major
business policy changes infuriating the brothers who had been running
the business for years. The
patriarch had wanted all his children to benefit from his financial
success and had never intended to leave his wife and children in such a deeply conflictive situation.
Could this have been avoided?
And, if so then how?
As discussed in previous articles,
few people like to discuss their impending passing and many, regardless
of the size of their estate, refuse to make appropriate plans.
There is a multitude of different reasons for this including the
truly difficult tasks of facing one’s demise, figuring out one’s
wishes, creating
appropriate vehicles, determining
the best time to move substantial assets to the next generation and
discussing with one’s loved ones all of these matters. Just like in
the Perez family, most often the needed discussions often just do not
happen.
The estate planner of course is an
expert in the legal and/or financial realms.
His (or her) expertise may be in paying the least amount of
taxes, creating trusts and other entities that preserve and hopefully
enhance the wealth of the family. But
they are not trained in human character or family dynamics.
In fact, many shy away from discussing the impact of their
recommendations on various family members or the family at large.
And no wonder! Discussions
like these may erupt into family feuds and hostilities.
Often the patriarch does not discuss his estate plans even with
his wife, never mind his children.
In reality, each person can choose
three forms of dialogue. The first, and most common form is not to have any
discussion. When the person
passes away, the family meets in the attorney’s office for a reading
of the will. The second
route is for the patriarch to inform the family before he passes away.
In this case the patriarch may talk privately or at some kind of
family meeting with all the family members making clear his estate
plans. The third route is
to hold a family meeting where the estate plans are discussed and where
family members are invited to share their hopes, feelings and wishes.
The patriarch, of course, makes the decision but in this scenario
he listens to the wishes of his spouse and children.
An interesting exercise is to
imagine each scenario for a family that you know three years after the
passing of the patriarch. If there is no discussion, what will you predict as to the
future behaviors, self esteem and attitudes of each family member.
How well do you see the family functioning in the future?
If there is a business, how will it impact the business?
About the lack of open discussion, some experts in talking to the
patriarch put it this way – The Family will discuss your will and
their inheritance. The only
real question is – do you want to be present during the discussion?
What should Estate Planners do?
They should help the patriarch and the family identify the
consequences of their choices on the family and each individual. In
particular, they should help the patriarch look at the kinds of choices
he can make, the impact of these choices on the family and clarify the
difference between tax advice and family enhancement. They should
educate their clients into talking to their families about their values
and how well their estate plan aligns with their values.
They should encourage and if desired facilitate Family Dialogue!
Many Estate Planners are wary of Family meetings and rightfully
so. If the Family Dynamics
are tricky or explosive, encourage your client to utilize someone
trained and skilled in Facilitating Family Meetings.
In these meetings expect to talk not only about estate planning
– but more importantly the values of the patriarch and the family the
goals and aspirations of each family members and how the financial and
other forms of wealth can best serve the family’s values.
Marc
A. Silverman is a family business consultant practicing in North and
Latin America. He can be reached at marc@sii-inc.net
