Contributing Editor | Dollars and Sense
How to Transfer Values Along With Wealth Help heirs make the most of your bequest by offering guidance during your lifetime — and by reinforcing that leadership with appropriate estate planning tools. Jennifer Green
Making sure younger generations receive the maximum benefit of an inheritance requires careful planning on the financial side, perhaps by choosing a trust over a bequest to help minimize taxes. But you must also plan for the emotional side by considering now how to guide heirs in the future — possibly for generations. “Estate planning should be a process, not a task,” says J. Max Barger, vice president and senior wealth planner at PNC Wealth Management®. “The conversation with heirs should be ongoing, and it should focus on management, values, preservation and protection. How will the assets you share affect your loved ones and their finances? How will that wealth be perpetuated?” The stakes are high. A study of intergenerational wealth transfers among 3,250 families found that 70% of family wealth transfers fail, with heirs dissipating assets and families falling into conflict.1 What these families lacked was not legal, financial and tax advice but trust, preparedness and a sense of purpose.2 Barger suggests that families who want to support heirs (and avoid becoming part of the unsuccessful 70%) follow a two-part formula: communicate and coordinate. Key to communication: Forget that you’re family Families can find it hard to articulate financial expectations. Worries about burdening younger members or concerns about personal privacy can get in the way of saying what needs to be said. Barger recommends a counterintuitive solution: “The matriarch and patriarch have to step
out of their roles as parents and instead become ‘chief family officers,’ viewing their heirs as stakeholders,” he says. “Focusing on the needs of family members as people committed to the success of this common venture can help shift everyone’s frame of mind.” Know your real goals But what should these CFOs say? “Family leaders need to make clear what’s going to happen in terms of wealth transfer and what will be expected of heirs,” Barger says. That means explaining how assets will be transferred and setting goals for current and future generations. A family mission statement is one way to lay out those goals. “By stating what your family is about and what you want to achieve, you instruct and inspire heirs,” Barger says. Some families include stories about how the family wealth evolved and note positive outcomes of their philanthropy. ‘Early and often’ These stories can be an effective way to start communicating with even the youngest members of the family. Teaching lessons such as “who we are” and “what we stand for” early should be a priority. Done well, and backed up with consistent actions, they tend to groom generations to participate meaningfully in the family’s wealth. Barger uses two examples from his own upbringing to illustrate other ways this communication can start early “My father started teaching me about philanthropy by having me place our offering in the plate at church — even
The material presented in this article is of a general nature and does not constitute the provision by PNC of investment, legal, tax or accounting advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions expressed herein are subject to change without notice. The information was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy. You should seek the advice of an investment professional to tailor a financial plan to your particular needs. For more information, please contact PNC at 1-888-762-6226. The PNC Financial Services Group, Inc. (“PNC”) uses the names PNC Wealth Management®, Hawthorn, PNC Family Wealth® and PNC Institutional Investments® to provide investment and wealth management, fiduciary services, FDIC-insured banking products and services and lending of funds through its subsidiary, PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and uses the names PNC Wealth Management® and Hawthorn, PNC Family Wealth® to provide certain fiduciary and agency services through its subsidiary, PNC Delaware Trust Company. Securities products, brokerage services and managed account advisory services are offered by PNC Investments LLC, a registered broker-dealer and a registered investment adviser and member of FINRA and SIPC. Insurance products may be provided through PNC Insurance Services, LLC, a licensed insurance agency affiliate of PNC, or through licensed insurance agencies that are not affiliated with PNC; in either case a licensed insurance
80 Urban Home Charlotte October / November 2014