A 2012 study of 3,200 wealthy families by U.S. Trust showed that 70 percent failed to successfully transfer the family’s assets to the succeeding generation. The study found three reasons for this failure: lack of communication among family members; absence of a generally acknowledged purpose for family possessions; and lack of preparation on the part of heirs.
One would assume that most wealthy people have an estate plan in place, detailing how money and other assets should be distributed to succeeding generations. In addition, these plans will often include how any business operations should be handled.
The estate plans themselves are mostly solid. However, as cited in Denver Post article titled “About to inherit? Tips for avoiding family fights and tax trouble,” a study conducted by U.S. Trust found that some 70% of estate plans created by wealthy families fail to function as intended.
Why?
The reason most plans fail is due to lack of communication.
Succeeding generations destined to inherit the family wealth and business interests need to know what to expect and what to do when the time comes. Just as important, they also need to have plans of their own regarding the action they will take when the wealthy family member passes away. When they do not know what to expect and what to do, family feuds tend to erupt.
It is not enough to just have an estate plan. That plan needs to be communicated to those who will inherit through the estate plan. A good way to start the communication is to speak with your estate planning attorney about exactly what needs to be told to whom and when.
A good rule of thumb is to communicate early and often.
Reference: Denver Post (October 26, 2014) “About to inherit? Tips for avoiding family fights and tax trouble“
