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Complex Constellations: Managing Wealth and Legacy between Siblings, Blended Families, and In-laws

Wealth and Legacy Series: Part 4

In approaching virtually any matter related to wealth and legacy, a few family constellations are among the most important to consider:

  • Siblings
  • Blended families
  • In-law relationships

These relationships can be among the richest, most influential, and most complicated of our lives. In considering even basic aspects of your wealth and legacy, they warrant deep forethought and careful planning. At the same time, they present unique opportunities to foster closeness and a deep sense of stewardship and trust across the entire family.

Siblings: Life’s Longest-Lasting Relationships

Questions of how to handle the division of wealth and responsibilities between siblings are among the most common dilemmas we encounter in serving families. These questions can range from how you divide physical assets such as property and jewelry, to the roles children play (or do not play) in your business and estate affairs, to how to treat children with vastly different personalities, needs, or professions.

In planning any details related to siblings, we urge clients to bear a few things in mind:

Sibling relationships are often the longest-lasting relationships of our lives.

In most cases, sibling relationships outlast parent-child relationships as well as marriages. This might seem obvious, but it’s fascinating how rarely this reality dawns on many of us.

In a recent meeting with a client, we were talking through the mechanics of his estate plan. Part of his plan involves his brother, as well as his own children. At one point, he paused with an almost-astonished look; he said, “It just hit me that I’ll soon have known my brother for longer than both of my parents lived. Someday my kids could be sitting here saying the same thing. I want to get this right.”

While they’re never perfect, sibling relationships—if nurtured and supported—can be among the most consistent, stabilizing, and enriching relationship in a person’s life. Siblings can celebrate each other, advise each other, and support one another through some of life’s greatest trials (such as an illness, divorce, or loss of a parent or other loved one). While no parent or advisor can fully predict the future or the behavior of children, they can take steps to minimize strife or confusion and set these relationships up for success and growth long after the parent is no longer present to offer guidance and mediation.

It takes deliberation and transparency to manage against resentments and unintended consequences between even the closest siblings.

We recognize this is far easier said than done.

For example, you may be quietly struggling with determining which of your children should be the executor of your estate. Or you may have already named one of your children as executor without asking them if they want that responsibility, or without realizing how devastating it will be to your other children to learn their sibling has been named the executor. The easiest way to avoid landmines is to do 360-degree scenario planning, question your own assumptions, be as transparent as possible with all your children, and encourage your children to be radically transparent with each other and with you.

Don’t underestimate material things and their ability to spark ire or confusion.

We’ve had many clients tell us their children “would never fight” over a piece of jewelry, an antique desk, a family portrait, or great-grandpa’s original immigration documents. We’ve had other clients assume one of their children couldn’t possibly want to be bothered with inheriting a vacation home because they live hundreds of miles from the home or would never have the interest or money to deal with its upkeep. Some of the fieriest debates and deepest hurts we’ve seen occur among families were related not to money itself, but to material assets and a lack of communication about their disposition.

Whatever facet of estate and legacy you may be pondering, your advisors can be a tremendous resource in helping you anticipate and avoid problems among your children.

Blended Families: Ties that Bind Through Blood and Marriage

Blended families can present wonderful opportunities to imbue fresh perspectives into your planning. Discussing wealth and legacy together can also provide an intimate and unmatched opportunity to strengthen understanding between family members. It’s critical to find ways to inform, educate, and engage step-siblings. It’s also important to consider factors such as former spouses and their own advisors, attitudes, and roles as potential detractors or stewards for the family. Blended families, like sibling dynamics, also naturally beg the question of what is fair versus what is equal—a distinction we explore later in this piece.

Whatever the exact details or whichever approach feels right for you, we urge clients to face and even embrace these conversations rather than avoid or dread them. A 2015 syndicated Bloomberg piece reminds us that two in five marriages are remarriages, a third of blended families report conflicts among potential heirs, and only half of wealthy blended families have had open discussions about inheritance.

In-Law Relationship: Accounting for Diverse Backgrounds

As your family expands through marriage, in-laws will naturally come into your orbit. While some may remain in the background (other than the occasional holiday gathering), others may have a stronger influence in your life and perhaps your business.

One important factor we urge clients to consider in planning is the background in which those in-laws grew up, as well as their current values around money and legacy. Perhaps they’ve had life experiences similar to yours, or perhaps their lives have been astonishingly different. Regardless, it’s important to take the time to understand their world view and factor it into your planning.

For example, in part one of this series, we talk about the idea of “immigrants” to the land of wealth versus “natives.” Dr. James Grubman, an expert in the psychology of wealth, and author of Strangers in Paradise: How Families Adapt to Wealth Across Generations, uses this metaphor to describe how individuals come into wealth. Generally speaking, immigrants are new to a life of prosperity and may have experienced significant hardship or uncertainty. They may not have the depth of experience with wealth management, legacy, and stewardship and may even be intimidated. “Natives” have generally been raised in a setting of affluence or plenty and thus have a very different set of experiences.

Whatever the case may be, it’s important to listen, observe, empathize, and wherever feasible, seek to engage in-laws in your family conversations around estate management and legacy. For example, find ways to include them in the family meetings we discuss in part three of this series. While you may be reluctant to involve them too deeply, they can become invaluable allies in continuing the family legacy and in passing it down to future generations. By looking for select opportunities to bring them into the fold, you can give them a deeper sense of your family fabric and the causes closest to your heart, understand them better in return, and enable them to become more effective, more engaged stewards of the wealth they or their descendants may one day inherit.

The Universally Relevant Question of “Fair vs. Equal”

So many discussions around wealth and legacy come down to the all-important distinction between “fair” and “equal.” As we talk with clients about siblings and blended families, it’s common for parents and wealth creators to focus on a mathematically “equal” division of roles and assets within the family.

While it’s natural to conflate the two concepts, they do differ in important ways. Much like the notion of “spirit of the law versus letter of the law,” it’s important to look beyond mechanics and numbers to what is right at a human level when considering how to treat various members of your family.

As a firm, we believe fairness is more important and the higher ideal to achieve when it comes to wealth planning. Equality is not unimportant. But, by comparison, it’s a tactical means to an end which is less elevated than the notion of fairness.

The idea of “equal” can also be problematic if followed too doggedly.

For example, we have clients with children whose chosen professions and life needs differ greatly:

In one case, a sibling has chosen to become a teacher rather than join the family business. The teacher will have an income that’s different than her siblings, who are executives in the family business. In another case, a client has three adult children. Two of them are presently in good health, while one of them has a chronic medical condition which will place financial strain on the child for life.

In both cases we found that the parents were jumping to conclusions about how to divide the estate and how to involve the children in planning discussions. With best intentions, both sets of parents were overly focused on being “equal” in how they treat their children. But as we’ve urged the parents to talk openly with their children, they’ve realized their children had surprising views on how the family wealth should be managed and divided.

Both families have been able to reach more nuanced agreements about what is “fair” regarding distribution of assets and running of the family’s affairs. The teacher wants to be educated about the estate and wants to be included in family meetings and other milestone events. She also believes her siblings should be rewarded for managing the family business. The two healthy siblings are concerned about the healthcare costs their brother will face in the future, and they want to be far more generous in supporting him than the parents ever realized.

Above All, Talk it Out

In the uniquely complex relationships that exist with siblings, blended families, and in-laws, don’t fear transparency and don’t be limited by assumptions. Based on decades of working with clients, we believe that more than anything, a lack of transparency and bad assumptions can have far more toxic consequences within families than genuine attempts to have open conversations and do the right thing by one another.

Below are few examples of questions that can be used to prompt conversation and prevent miscommunication within these relationships:

  • Do the in-laws within your family know the early history of your family and how you want to convey that to future generations?
  • Have you been as specific as possible with your children or in-laws as you talk about how to divide assets such as jewelry, furniture, collectibles, or a cherished vacation home?
  • Have you taken adequate measures to support the future caretaking of physical properties you plan to convey? Do your loved ones know about provisions you’ve made, or have you shared your ideas and suggestions on how the properties should be managed?
  • Are you leaping to conclusions or making mistaken assumptions, or can you ask your children, stepchildren, or in-laws for more insight into how they’d like to see your estate affairs handled?
  • Have you talked with your children individually and together about hopes or fears they have about the handling of your estate? For instance, do they assume you plan to gift them the family heirlooms they hold dear? Do they fear speaking up about wanting their grandmother’s monogrammed silver because their brother or sister might view them as greedy or acquisitive? Do they secretly fear inheriting a vacation property because of the burden of caring for it? Are they surprisingly indifferent regarding certain valuables?

Questions like these and countless others can be tailored to reveal new insight into those around you and provide valuable data points as you craft and refine your plans. When in doubt, talk through your fears and concerns with your advisors. They can help you navigate these conversations with full awareness and empathy, help you anticipate conflict, aid you in creating greater resiliency and closeness within your family, and ultimately extend the longevity of your wealth and legacy.

We appreciate you taking the time to read this blog post, and we urge you to explore the other posts in our Wealth & Legacy series. Across each post, you will see common refrains of transparency, open communication, and a willingness to set aside assumptions.

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