• Jeff Sproul

Avoiding Family Conflicts During Estate Planning


In past editions of the Artisan we have broached the topic of Estate Planning a number of times. However, with a number of issues now solidified south of the border, families that have been holding off, not knowing how US investments (including properties) would be dealt with, can finally begin planning their estates, knowing the updated terms. For high-net-worth families and those with closely-held family businesses, this means re-evaluating their estate plans and seeking vehicles to mitigate tax exposure.

Unfortunately, estate planning can also cause tension over inheritance, often leading to litigation that can become lengthy and costly with no clear winner. This holds true for many families, no matter where your assets may be domiciled. From our years of experience in the Estates and Trust industry, we have seen that family litigation occurs not from a lack of trying to solve the issue, but from a lack of planning. Below are key tactics that have been suggested to help take advantage of potential tax cuts, and to help avoid family battles over wealth transfers.

Overcome the concept of fairness. One of the most common issues is when parents try to be “fair” to ensure their children get along. Typically the parents are also trying to protect and keep the legacy asset (whether it is a business, a home or the family cottage)in the family and on a growth trajectory.For example, if one sibling is invested and interested in the family business, while the other sibling is not, splitting the business“fairly” between the two siblings, i.e. giving each sibling an equal portion of the business,is likely to cause tension and unnecessary disagreements, with possible legal battles down the road.

Transfer assets based on a natural flow. Instead of transferring assets equally, focus on what makes sense for the individual to whom you are transferring the asset. For example, if only one sibling is interested in the family cottage, he or she should be considered the future owner of the family cottage. If another sibling is not interested in the cottage, other provisions can be made to transfer different assets to that child.

Protect family assets.

Each sibling’s desires and needs are different. The individual might be young and have other goals, might not have the same interests as the family, or might have special needs. In such circumstances a trust can be set up to protect both the individual and the family assets. For example, an individual can receive income for life and have a trustee appointed to manage the financial assets.

Make major decisions with every family member in the room.

When it comes to transferring assets or discussing the future, all members of the family need to be on the same page. Not doing so now can lead to family tension and legal battles in the future.

Do not wait for the original founder of the family business, or a parent, to pass away.

The more you talk now, the better it will be for your family’s future no matter how difficult the conversation.

Evaluate what you can and can’t afford to transfer. The first step in beginning the estate planning process is to get a clear picture of the financial make-up of the estate. Determine the assets that are more likely to appreciate in value, giving consideration to those that also carry other intangible values, such as a family legacy.

Treat estate planning as an ongoing process.

Every individual has life-changing events – marriage, children, divorce, sale of a business, stock options, an IPO – and changes in beneficiaries. This is often referred to as a “milestone review.” When a financial or significant life milestone occurs it is critical that the estate plan is reviewed and updated when appropriate.

Pick the right professional advisor.

Estate planning is a very personal business for both the advisor and the individual client. Engage someone you trust who understands personal relationships. Understanding family dynamics and making family members comfortable with all areas of the transfer of wealth is important. At Northland Wealth Management, we focus on fostering deep personal relationships with the families we serve.

Communication and coordination are essential to ensure that the best overall tax, financial and personal solutions are realized. Please keep in mind that assistance from multiple advisors will be needed during this process. As a wealth manager, we understand our clients’ “big picture” and are able to co-ordinate the necessary professional advisors as a team to provide significant value in selecting the best course of action.

When planning one’s estate, don’t delay discussions about difficult inheritance and wealth transfer issues. A family willing to have an honest and open discussion now may avoid damaged relationships and the associated, negative financial impacts later.

#EstatePlanning #FinancialPlanning

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