When a Traditional Will Won’t Do

Wealth can be a blessing for a multigenerational family. It provides the opportunity to experience comfort and freedom while uplifting other communities. But without a solid plan, a family could see its financial assets dwindle and even disappear as it hands down wealth to subsequent generations.

Many families with substantial wealth may already have an estate plan—one that focuses on administration, tax considerations, and proper legal documents. But a family’s overall relationship to wealth can be improved when traditional estate planning includes governance structures that address the emotional impact of inheriting wealth, too.

Think of governance as addressing a family’s values, skills, and life experiences. It helps ensure there is a strong yet flexible framework for unified decision-making and communication that can span generations. When an estate plan is aligned with governance, it becomes “purposeful” and often includes the following aspects (Display):

  • A shared family purpose and legacy
  • A set of values and beliefs that can inspire the next generation
  • A forum for communication among family members
  • A well-defined plan to educate and prepare future heirs

Governance structures also need to evolve over time. That way, they can help families develop and refine an estate plan that encourages stewardship of both family and wealth. Below, we’ve outlined some of the key elements of governance.

  • Mission Statement

Writing a mission statement is the perfect way to establish a powerful foundation that cements shared values, shapes a family’s identity, and reinforces what is important.

  • Family Constitution

As families evolve, successive generations often wish to contribute, whether through wealth building, business ventures, or philanthropy. But expanding the circle introduces complexity. A family constitution serves as an overarching document that includes all the agreements, policies, and expectations that govern family interactions and decision-making. It won’t solve every familial problem or map out a comprehensive estate planning strategy. But the standards that emerge from a constitution can promote cohesion among family members who have joined together to create it.

  • Family Assembly

This forum offers the opportunity to discuss and explain current and future wealth transfer plans as well as a chance to review trust asset management and performance.

A Meaningful Estate Plan

Let’s consider a couple, Sarah and Joel, who recently sold their business. The retired entrepreneurs knew they needed to plan their legacy—something they’d put off while focusing on their impending exit. With the deal now closed, Sarah and Joel used the proceeds to fund trusts for the benefit of their three children. But they wavered when the time came to unveil the family’s wealth, concerned that the knowledge would de-motivate their heirs.

The couple scheduled a family meeting to disclose a portion of the family wealth and allow their children to get comfortable with the estate planning that was in place. As facilitators, Bernstein opened the meeting with an exercise to set the stage for free-flowing exchange of key family values.

Key Aspects of a "Purposeful" Estate Plan

Next, Sarah and Joel revealed that each child had a trust set up for his or her benefit. The family attorney also attended, outlining why trusts were funded, instead of outright gifts being made. Part of the rationale was to provide for professional management of assets along with creditor (or divorce) protection.

In subsequent meetings, the family worked together to create a family mission and vision statement. Quarterly education meetings and semiannual family gatherings were established to discuss investment performance and philanthropic goals.

As time passed and the family grew in numbers, a marriage proposal prompted the creation of a family constitution. While legal steps helped properly structure the family’s estate plan, the couple’s purpose was fulfilled by focusing on their legacy—as defined by their stories, life experiences, and values shared during their family meetings.

Infusing Your Plan with Purpose

Integrating governance structures into an estate plan can help prepare future heirs to receive wealth, make joint decisions, and avoid unnecessary disagreements that may leave relationships strained. It can also turn an ordinary estate plan into one that is “purposeful.”

Authors
Emily Neubert
Associate Director—Wealth Strategies Group
Jennifer Ostberg
Director—Wealth Strategies Group

This blog synthesizes the full article, Where There’s a Will, There’s a Way: The Purposeful Estate Plan.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

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