Part II: The Multi-Family Office

July 21, 2020 - J. Richard Joyner
3 Min read

In my last blog, I discussed what I see as the benefit of an integrated service team and approach working on behalf of successful, multi-generational families. A great example of working on behalf of families is in the estate planning arena.

First of all, it’s important to note that there are lots of estate planning advisors that are extremely thoughtful, careful, and professional. However, there are times when the plan design process is incomplete. It begins with a review of current plan documents, a high-level snapshot of the family’s financial position, and a general discussion of the family’s estate planning goals. Often, the process is heavily estate tax focused.

What’s missing? In my mind, it’s the conversations. As part of the planning process, families should have conversations about who should benefit from the estate and how much they should get. Is there a point where “enough is enough?” Who are the most qualified people to make decisions about what’s left for heirs? Should the heirs themselves have complete control over the assets that benefit them? Are there specific values you want to incorporate into the plan such as a charity? Do you want to discuss your plans or your choices with kids, grandkids, or in-laws? What do you want to convey about the future of a family business, if there is one?

These conversations are important to the process. A deep understanding of what things may be like for inheritors can help inform many of the choices and can highlight gaps in inheritors’ skills or knowledge. Assess the family’s readiness to talk about specific dollar amounts. I tell families regularly that it is not critical to disclose dollar amounts too early in the process. Limit conversations to concepts and process. For example, “your father and I have left you enough at our deaths so that your future is likely secure under any circumstances.” And “when you need money after our passing, you’ll need to talk with _____ to make those requests. I’ve put _____ in charge because I trust him, her, or them to make good decisions on your behalf.” It’s easier to discuss who will make decisions about access to money and how, than to tell them that they will inherit $x million. Over time, those conversations become easier and dollar amounts can be added.

What’s the next step? Talk about roles and responsibilities in administering the plan. I’ve written on this topic before, so I won’t repeat all of that here. However, I’d emphasize that deciding on the right trustee or co-trustee of a trust has significant consequences to the family, and it’s often given very little thought in the planning process. Specifically, naming people who are close to your age is often not the best “default” choice. And finally, it’s worth considering a corporate trustee for some role in the succession of trustees, so long as you can become comfortable with the way they will steward the family’s wealth.

The other discussion that sometimes gets shortchanged in the process is the actual process of administering the estate. The difference between a difficult estate administration and one that goes more smoothly is the level of knowledge the advisors have about the details of the estate. Granted, this is a little bit esoteric, but knowing the composition of the assets, how they were acquired, their tax basis, and having complete and up-to-date records on a variety of matters can spare the family a great deal of time and expense. Waiting until after someone passes often means that it is more difficult to locate or identify key documents and information.