It can be awkward to start a conversation with family members about transitioning wealth to the next generation.
But for family business owners, it’s a necessity.
Tom Deans is out to help, and he’s provided leaders a few questions to ask to get the ball rolling in his book, “Willing Wisdom: 7 Questions Successful Families Ask.”
Deans will be the keynote speaker at the Family & Closely Held Business Summit presented by BizTimes Media on Wednesday, July 12, from 7 to 11:30 a.m. at Potawatomi Hotel & Casino in Milwaukee.
“125 million American adults do not have a will, which is roughly 50 percent of all adults,” Deans said, adding about half of those with wills have badly outdated documents. “80 percent of those people who do have a will do not share them.
“Consequently, people are learning about what they are inheriting when it’s too late. Because they almost always have questions. Those conversations are irretrievable. They can’t be had.”
No one likes to talk about death, but Deans says starting early and “inviting your family to your death,” as an open discussion and document is the best way to transition the wealth, while making intentions clear. A will should be a personal document and a person’s greatest written legacy, he said.
“There’s lots of superstition in this whole subject, which is really kind of odd because you’re dealing with business owners who are typically smarter than the average bear,” he said.
Some family leaders worry starting the conversation will open up a can of worms and family dynamics will spiral out of control, especially if there are multiple children who are receiving unequal shares.
“The problem never goes away, and we know this because the amount of estate litigation is on the rise,” Deans said. “It’s tearing families apart. So much of this could be avoided by a family writing a $1,000 will as opposed to spending hundreds of thousands of dollars in court fees.”
Among the questions Deans encourages families to ask: “What word best describes our family? Share a family story that helps explain the word you selected.” And “How would an inheritance advance your dreams for yourself, your family and your community?”
According to Deans, about $2 billion will be inherited in the U.S. each day over the next 10 years, as the financially successful baby-boom generation ages.
And many families that have amassed wealth have a family business to pass on. That can be complicated in and of itself.
“In the absence of an estate plan, there is no business succession plan,” Deans said. “We know that the state of affairs of estate planning is absolutely appalling.”
Deans cautioned that business owners and affluent families shouldn’t facilitate this conversation or the division of assets without a third party’s assistance. A wealth advisor, accountant and lawyer could all help facilitate a family meeting to discuss wills, powers of attorney, shareholder agreements, living wills and last wishes.
Most family members are curious about how a family came to amass wealth, what the parents’ expectations are for the children, and how the children would use the money, Deans said.
“The ultimate meeting is a three-generation family meeting,” he said. “The really smart dynastic families are using family meetings to actually look backwards and tell the stories.”