Susan R. Schoenfeld, CEO and Founder of Wealth Legacy Advisors LLC serves as a ‘thought partner’ to families of wealth through personal attention and human spirit. Susan is a nationally recognized family wealth consultant and award-winning Thought Leader; she provides guidance on legacy, next-generation, stewardship, governance, leadership succession, and philanthropy. Susan recently spoke about her three rules of family governance.
We all know that the three rules in real estate are location, location, location.
My three rules of family governance are communication, communication, communication.
But what do many wealth creators think the three rules are? Control, control, control.
So many wealth creators try to control the behavior of their descendants, through the proverbial “hand from the grave” using restrictive trust provisions that will often survive many decades longer than the wealth creators themselves.
I once read a trust instrument that required the trustees to retain the assets in trust and distribute only income — no principal distributions — to the beneficiaries until they reached age 70! What was the message to the beneficiaries? “My parents never trusted me.”
Sometimes, an extreme level of control makes sense, especially if the beneficiary has a pressing issue, such as a physical or emotional special need, substance abuse or other challenge. I worked with a family a few years ago; the daughter was financially savvy and capable, but the son was in recovery for an addiction issue, and the parents wanted to treat their children unequally, leaving provisions for their daughter to inherit outright and the son to take in trust. I suggested that they set up separate trusts for both of their children, and provide the trustees with broad discretion to distribute principal as they saw fit in the best interests of each of the children. That way, they were not setting up their children for lifelong mutual resentment of unequal treatment.
If the parents do decide to treat their children unequally, my best advice is for them to communicate their reasons in person, giving the children the opportunity to ask questions. Hearing the explanation in the parents’ own voice may go a long way toward avoiding an ugly Will contest later on.
The rule of communication goes beyond communicating the details of the estate plan. It is amazing how many people tell me that their kids (or grandkids) have no idea that their family is wealthy. Your children watch how you live, how you travel, and how you donate. I understand that it’s scary to have “The Money Talk” with your kids. I often say that The Money Talk is even scarier for parents than the dreaded “Sex Talk.” But pretending the wealth doesn’t exist does a disservice to your children, and deprives them of the opportunity to hear directly from you the stories, messages and values that underpin your creation of that wealth.
That is why my three rules of family governance are communication, communication, communication.
Susan Schoenfeld, a public speaker & thought partner to families of wealth and their advisors, is an award-winning thought leader. Susan’s switch from successful estate planning attorney and CPA to a trusted family advisor and thought-partner was inspired by families of wealth asking her searching questions beyond estate tax planning. As a conflict-free advisor who provides no investment, tax, or legal advice and sells no product, Susan shares her insights directly with wealthy families and with financial services experts. She is active as a keynote speaker and a leader of break-out sessions and workshops at conferences throughout the US.
