Navigating Estate Planning With Your Family

In partnership with Forbes

How clear communication can help families navigate the challenges of planning for wealth succession.

What’s more difficult: building an estate or passing it along to heirs?

Without the right road map, wealth transfer can sow family dissension that undermines decades of hard work and wise wealth management.

To help families elude that outcome and successfully negotiate the challenges of planning for wealth succession, two of our experts offer advice on communication, choosing an executor, trustee or other key agent, setting up trust incentives and restrictions, and more.  

What are Common Mistakes in Estate Planning?

Most people only think of the nuclear family they have today when planning their estate, says Kevin Rogers, managing director and family wealth advisor at BNY Mellon Wealth Management. But for a family with a sizable estate, it’s crucial to consider how to preserve wealth for three, four or even five generations into the future. 

Clear communication and collaboration are other prevalent stumbling blocks.

“The adage that ‘he or she who has the gold makes the rules’ becomes the problem,” Rogers says, explaining that even though the client may be “making the rules,” they should consider others’ perspectives.

Too often, estate planners fail to involve beneficiaries in structuring the estate. For example, planners may work with grandparents to make decisions about their grandchildren without talking first with the children’s parents.

Whether implementing trust restrictions or forming family LLCs, high-net-worth individuals should seek their family’s input. That doesn’t necessarily mean they have to accept all of the suggestions, Rogers says, but factoring wants and needs into decisions is critical.

Joan Crain, senior director and global family wealth strategist at BNY Mellon Wealth Management, encourages clients to share a Letter of  Wishes with trustees, in order to communicate their hopes and goals when establishing trusts and broader wealth plans. It’s also important to hold regular family meetings to discuss successive information and family values, she says. Having an objective facilitator lead these meetings is often useful, and preparation is critical so that the facilitator gains insights into family dynamics and the objectives of the meetings.

How Do You Choose An Executor, Trustee And Other Intermediaries?

Clients are often inclined to designate one of their children as the estate executor (who distributes assets according to their wills) or trustee (who administers and manages the assets in a continuing trust). But it’s important to consider whether that person has not only the intellectual ability but also the time and emotional ability to work collaboratively with other family members to settle the estate, says Crain.

“More often than not, even if the children got along great while mom and dad were alive, when it comes to dividing the money and addressing the legal issues after the parents have died, problems arise,” Crain says. “It puts a big burden on the person who's chosen and often ends up in discord.”

Rogers offers a similar perspective, reminding clients that choosing someone as an executor is not a gift. When siblings fight over the responsibility, for example, Rogers explains to them that the decision is not about playing favorites.

To avoid conflict, Crain recommends appointing an independent or corporate trustee, whether that’s a wealth management firm, a family attorney or another trusted advisor. This third party can serve as co-trustee with one of the children, if necessary, but will be responsible for making the difficult decisions and communicating with the family. “We suggest having an independent trustee as sole or co-trustee with the insight and experience to provide creative solutions,” says Crain.

In addition to a proactive wealth management firm, high-net-worth individuals should also include additional professional advisors such as a certified public accountant, an estate planning attorney, an appraiser if a business is being bought or sold and an insurance expert.

What Mechanisms Can Protect Generational Wealth?

Rogers says one of the most pressing concerns for high-net-worth individuals who transfer wealth is what happens once a family member gets access to the money, especially if a beneficiary struggles with money management or other challenges that could make them vulnerable to financial losses. 

Rogers and Crain say trust incentives as well as restrictions can be an effective tool in these situations. For example, incentive trusts can contain clauses that require family members to show their W-2 to receive a distribution that matches their salary – incentivizing beneficiaries to continue earning their own paychecks. Conversely, clients can use clauses that limit withdrawals by their beneficiaries to specified emergencies, education or health expenses or business ventures.

Both experts say it’s crucial for estate owners to communicate their intentions early and often, allow for some flexibility in how the money can be spent and use legal protections when necessary to safeguard generational wealth.

“What people are trying to avoid is the common negative issues with wealth – getting into bad habits or spending money frivolously,” Rogers says. “They want to give their loved ones the opportunity to have a leg up in life.”

  • This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. The Bank of New York Mellon, DIFC Branch (the “Authorised Firm") is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorised Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 240 Greenwich Street, New York, NY, 10286, USA. In the U.K. a number of the services associated with BNY Mellon Wealth Management's Family Office Services– International are provided through The Bank of New York Mellon, London Branch, One Canada Square, London, E14 5AL. The London Branch is registered in England and Wales with FC No. 005522 and BR000818. Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, One Canada Square, London E1C 5AL, which is registered in England No. 1118580 and is authorised and regulated by the Financial Conduct Authority. Offshore trust and administration services are through BNY Mellon Trust Company (Cayman) Ltd. This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors. This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such. BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland. BNY Mellon, National Association is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA") and the BMA does not accept responsibility for the accuracy or correctness of any of the statements made or advice expressed herein. BNY Mellon is not licensed to conduct investment business by the Bermuda Monetary Authority (the “BMA") and the BMA does not accept any responsibility for the accuracy or correctness of any of the statements made or advice expressed herein. Trademarks and logos belong to their respective owners. BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. © 2021 The Bank of New York Mellon Corporation. All rights reserved.