The Importance of a Family Meeting

The holidays are a great time to reconnect with family and friends on life events that have occurred since the last time seeing one another. Conversations about the social aspect of life are effortless; because we look forward to them, our discussions flow without much need to plan for them. However, other topics such as money or “what to do if something happens to me,” requires much more thought and can induce stress, so we tend to avoid them. Many of us were taught not to discuss personal financial matters with anyone; I am not certain if the reason was for pride or protection. Certainly, it is not appropriate to know the neighbor’s net worth, but there are reasons it makes sense to discuss personal wealth with family or other appropriate people.

Why? You might need their help someday to navigate your financial affairs when you can no longer manage them. Doesn’t it make sense to bring them in the loop now, so they aren’t scrambling around trying to figure it all out in haste? And when that conversation transpires, you should include a discussion about the family estate plan. Having a family meeting to discuss your estate and financial matters is a great way to facilitate this important conversation and could be a major step toward ensuring family wealth remains just that, family wealth.

We are entering into the “great wealth transfer” stage. This is significant because trillions of dollars will begin to transfer from spouse to spouse and parents to children. According to the Institute for Preparing Heirs, 90% of wealth transfers will not make it to the third generation. Sadly, in most situations it is not due to a failure to execute a proper estate plan. It has more to do with non-tax related reasons the legacy fails to thrive. First, some wealth creators don’t trust family enough to share information and therefore fail to communicate financial matters with them. Many of my clients have disclosed to me that they were afraid if they shared family financial information, their children would lose the desire to become productive members of society. Second, there is a lack of education around money to prepare heirs for inheritance. Baird Financial Advisors continue to have informal discussions. Your Baird Financial Advisor has access to a variety of financial and estate planning material, and we’re working to create a comprehensive suite of materials to better guide families in this area. Stay tuned. A third reason a legacy may fail is due to a lack of a coordinated mission or purpose for family wealth. Stephen Covey, author of The 7 Habits of Highly Effective Families, states, “A family mission statement is a combined, unified expression from all family members of what your family is all about – what it is you really want to do and be – and the principles you choose to govern your family life.” Having family meetings about wealth promotes family unity by proactively addressing these issues so the family f inancial legacy can thrive.

Not sure if you need a family meeting? Ask yourself these questions:

• Do all family members know the family history and how their predecessors worked to arrive at the family wealth?
• Is our family prepared in the event of a medical emergency or an unexpected health diagnosis?
• Are our beneficiaries familiar with the general framework of the family’s estate plan, and understand how it impacts them?
• Are beneficiaries aware of their future roles and responsibilities regarding the family estate plan?
• Has our family discussed the ultimate distribution of our keepsakes, art and collectibles?
• Has our family discovered the values we share and want to pass on to future generations?¹
• Do we have a charitable gifting program to foster a culture of gratitude and generosity, if applicable?

¹Institute for Preparing Heirs, preparingheirs.com

If the answers to these questions are “somewhat” or “no,” a family meeting may be beneficial.

How do you get started on the journey to plan a family meeting? Start slowly. Only you can decide what you feel comfortable sharing, but a great place to start is to discuss how the family earned their wealth and the wealth creator’s vision. Did you create the wealth or did a previous generation springboard the effort? The next step could involve describing the current estate plan and the roles family members have in implementing the plan. Depending on the complexity of your plan, the types of documents to discuss include powers of attorneys, wills, and trusts. Make sure your estate plan reflects your current wishes. If it doesn’t, you will need to do some work with your attorney to update documents before you schedule a family discussion. Once complete, you may wish to illustrate the plan by having an expert create a flowchart. A flowchart is a pictorial explanation of your estate planning documents and creates a much easier way to explain a plan than flipping through lengthy documents. Having family meetings is also a way to introduce trusted advisors to the next generation and can create continuity as wealth transitions. Trusted advisors can include the financial advisor, trust officer, attorney, CPA, and others who help steward the family legacy. Advisors can also be helpful in communicating the details of the estate plan during the meeting. Other meeting information that can be highlighted is a statement of net worth, location of important documents, disposition of personal property and collectibles, and the benefits of leaving money in trusts. All this information is important in creating understanding and respect around the family legacy plan.

The most important benefit of the family meeting is the impact made by the wealth creator(s) when they communicate their hopes and dreams for the family legacy. Sharing family values face-to-face is much more impactful than hearing it from a third party, such as an attorney or trust officer, they may not know. Sharing this personal information can help the family build a deeper understanding and respect around the plan’s purpose and intention. Creating a family mission statement is a new concept that families are beginning to explore. As trusted advisors continue to suggest building a mission statement, it can help ensure the family legacy and wealth endures beyond involving the next generation in the process. This process can be transformational as we see family realize the legacy is not about what they “get from wealth,” but what they can “accomplish with wealth” together, for generations to come.

This article just scratches the surface of Baird’s commitment to our clients and their families when it comes to planning for the transfer of family wealth and values. We feel promoting f inancial literacy and helping prevent the sudden wealth syndrome for inheritors will be mutually beneficial in our pursuit to be good stewards for our clients and their families. Are you interested in learning more about having a family meeting? Contact your Financial Advisor to start a discussion.