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. Three reasons: lack of communication among family members; absence of a generally acknowledged purpose for family possessions; and lack of preparation on the part of heirs.
It is a fair assumption that most wealthy people have an estate plan in place, setting forth how money and other assets are distributed to succeeding generations. In addition, certainly for those families with operating businesses, the family would provide specifically for how business operations should be handled, wouldn’t they? Probably not.
The estate plans themselves for such families, when they actually plan, are mostly solid. However, as cited in Denver Postarticletitled "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? Mostly 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. And what is expected of them. As important, they 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.
If you would like to chat with us at the Graham Law Firm, you will always find our information on our website www.thegrahamlawfirm.com.
Reference: Denver Post (October 26, 2014) "About to inherit? Tips for avoiding family fights and tax trouble"