For many, it is a common dream: a peaceful retirement after years of hard work providing for your family. It is the iconic American Dream to work, then to pass along the fruits of your labor to the next generation. But as lovely as this image may feel, the transfer of wealth is not as easy as it seems. This is especially true if you have more than one child.
A 2014 survey by UK law firm Seddons found that 44% of estate distribution disputes were among siblings. Sibling squabbles over estate distribution are not uncommon and should be dealt with ahead of time.
The transfer of wealth is loaded with nuances that can cause confusion. Having more than one benefactor in an estate can lead to additional strife between already stressed family members who are discussing the potential loss of a loved one or dealing with the reality of that loss. Having an open and honest dialogue with loved ones is an essential first step to setting expectations.
For Baby Boomer women, who are uniquely positioned as stewards of the largest wealth transfer in human history, minimizing squabbles and resentment between their children over inheritance is a high priority. Many women may be inclined to change the way they divide their assets simply to ensure that it is “fair” in their eyes. This generation of women spent most of their time in the household with child-rearing at the forefront of their adult lives. They do not want their death to bring discord to the family into which they invested so much time, love and effort.
The most effective way to reduce potential rivalries among siblings is to decide how to allocate wealth before the transfer is necessary. Having an open and honest dialogue with loved ones is an essential first step to setting expectations. Striking up a conversation that centers around mortality is difficult, but it is also a must to ensure a seamless transfer of your assets.
A note to advisors: It is essential during this time to be professional and impartial during financial transitions. Listen to your clients’ desires and advise them on the best strategies to meet those desires. Use your credibility to provide a calming, authoritative presence. Your clients already trust you and let you into this very personal process. Show them and their potential beneficiaries that it can be smooth. Everyone can leave satisfied under your care.
Every family dynamic is unique, and all siblings will respond to situations differently. There are two common confrontations that can occur during estate distribution:
As these situations show, dividing your assets either equally or unequally among the inheritors can cause issues. The best way to address these potential setbacks in the process is to talk about them before they come up. Talk clearly with your advisor and children to ensure that everyone understands the motivation behind the asset distribution.
The type of assets you are distributing may come with their own conflicts. The Seddons survey also reported that more than half of the will disputes among the 1,500 participants were related to land and property, which are more difficult to divide. In addition, 21% of disputes during estate distribution were related to jewelry, which holds special sentimental value and therefore requires special conversations and a plan for how siblings will choose these tangible assets.
An effective strategy is to leave behind a detailed personal letter or video recording with your will. This form of communication is not legally binding, but it can remind inheritors of the logic and reasoning behind the decisions in the will. If you have already discussed this with your family and advisor, the personal message is a reminder of previous conversations, and it reinforces your wishes.
More so than many other problems that arise within money management and financial transitions in families, sibling squabbles over inheritance can be very detrimental to family dynamics. Communication is key to tackling this multidimensional situation.
Boomer women, the generation now moving toward advanced age, can avoid excessive grief and strife in the years that should be the sweetest. Strong estate planning and conversations about estate distribution will help ease the transfer of wealth.
[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: The Legal & Tax Aspect of Investing: Asset Protection; Estate Planning, and Tax Efficiency and Goal Based Investing – Planning for Key Life Events. This is an updated version of an article originally published on October 4, 2017.]
Rhonda Ducote, president of Apriem Advisors, an Irvine, Calif-based independent, registered investment advisory firm with more than $650 million in assets under management. She has more than 20 years experience as a wealth manager, 17 of which have been spent at Apriem Advisors. Rhonda is passionate about her work and has pioneered the Women of…
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