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Practice Management

What happens when family squabbles impact your client’s wealth

You can’t work in this business without coming to the conclusion that families can be interesting. If families are glued together by love, trust and devotion, they seem just as often undone by anger, disagreement and resentment.

As you’ve probably come to realize, family squabbles take all shapes and sizes, but they are commonly fueled by one thing: money. While you can’t prevent your clients from being affected by family squabbles over money, you can help them put the right safeguards in place.

Much has been made of the “great wealth transfer” about to happen as baby boomers transfer trillions of dollars of wealth to the next generation. But what does this transfer mean for your clients, whether they are on the giving or receiving end? How can you help them navigate estate issues smoothly, while managing risk?

1. Make sure all plans are in place

If your clients know what they want to happen with their estate, do they have it set up that way? Like, right now?

Time matters. It’s not uncommon for people to have intentions for tomorrow that never come to fruition because people don’t believe they will pass away. It isn’t enough to tell your loved ones (or your financial professional) what you want to happen. Without a will, the state decides how to divide the assets belonging to an estate. If your clients are hemming and hawing, it may be time to practice a bit of tough love.

2. Know what situations can lead to contested wills/trusts

With blended families and second marriages, estates can become a battleground, especially if there are processes your clients didn’t follow properly. For example, one situation that can lead to a contested will is an improperly signed will. Each state has laws that govern the signing of a will, including how it is signed and who can witness it.

According to the American Bar Association, a person can’t simply make handwritten changes to a will and expect the changes to stand up in court. You need to draft a codicil, or an amendment, and you must follow the proper legal channels to draft the codicil. Amending a trust is an easier process, and your client should be able to add property to a trust (if the trust was drafted correctly).

Disinheriting someone can also raise a red flag, especially if the language around it wasn’t clear. If you simply fail to include someone, that person can argue that it was an oversight or a mistake, and try to contest. Also, if your client is making significant changes to a will, it may be better for him or her to revoke the will and draft a new will, versus using a series of codicils. Your client will need to use clear language that the new will revokes all previous wills. If not, it may give grounds for someone to challenge.

3. Speak frankly, even if it feels taboo

Too often, children think something is in place, when in fact, it’s not. They expect to inherit more, or to inherit a difference percentage. For their part, parents may not want to be transparent for a variety of reasons. Perhaps they are leaving money in a trust for their children, and are worried it will appear to be an inheritance “with strings.”

In fact, it may be that they are trying to keep the money safe, to ensure it’s there when the children need it. They should consider communicating that. When it comes to money, family and inheritance, decisions that seem quite clear to one person may not be clear to another.

If you have clients who are in the process of estate planning, encourage them to discuss their plans with their heirs. If your clients are the potential heirs, encourage them to ask questions so that there are no surprises during a time when they are the most emotionally vulnerable.

Communicate, be proactive and get it all on the table now, rather than later. It may feel morbid, but it can save your clients and their family members heartache, and pave the way for a smooth transfer of wealth.



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