KATIE BRODY
MARKET TEAM LEAD FOR PASADENA
J.P. MORGAN PRIVATE BANK
PRIVATEBANK.JPMORGAN.COM
Summer family gatherings can create opportunities for parents and grandparents to enjoy and get to know the younger members of your family a little better. It’s a good time to learn more about their jobs, friends, dreams they have—and more.
With this new understanding, you might be inspired to review your estate plan, will, and trusts, to see how you might align your family’s goals and values across multiple generations. For families with closely held businesses, a summer together may provide the perfect opportunity to discuss succession plans. Importantly, having meaningful planning conversations can help set your intentions in a clear and productive way. Here are a few considerations for families looking to tackle wealth planning conversations this summer.
Consider making philanthropy and your family’s legacy a special focus.
Family gatherings are an opportunity for members to share their interests and values. In this setting, family members can discuss such topics as individual and shared passions; guiding beliefs and motivations; and the time and ability they have to engage in charitable giving.
Using exploratory questions can help draw family members into the conversation. For example: What motivates you to give? What values influence your philanthropic decision making? Are there issues, populations or geographies you are eager to explore further?
The summer season can also lend itself to learning from specialists in a given field. Seeing a nonprofit in action can be a meaningful experience for a family. An example might be going together to visit an organization or volunteering at one of its events.
Consider new estate planning approaches.
A letter of wishes alongside a trust agreement can help clarify existing plans. A trust agreement is a formal document that is legally binding. Estate planning lawyers will often advise you to make its terms fairly general. After all, neither you nor the lawyer drafting it can know precisely what situation the trustee and your beneficiary will be facing in the years to come when funds are being distributed. For example, many U.S. trust agreements will stipulate that trustees provide for the “health, support, maintenance, and education of beneficiaries.”
In contrast, a letter of wishes is not legally binding. This letter will travel longside a trust agreement for as long as the trust exists, and provides additional guidance to help the trustee to better understand your intentions, your values, and perhaps your beneficiary.
For instance, a letter can explain to a trustee what you meant by “education,” as one person’s idea of education might be a Ph.D. in economics, while another’s might be a yoga class. Some letters of wishes can run 20 pages and sound like contracts; others read more like intimate family messages. Most are about two pages long and very straightforward.
Simple letters of wishes, kept up-to date, may serve its intentions best. The simpler the language and suggestions, the less likely a revision or amendment would be needed. It is very important to draft these letters carefully, as they will stand for future generations after the trust creator passes.
Consider involving children in the family’s businesses, family offices, or investments to support succession planning.
Advanced succession planning can provide an excellent opportunity to teach children the ropes. Hosting an annual family meeting involving the current and the next generation will make the process much smoother when there is a transition of wealth.
One of the main reasons why families have failed to transition wealth to the next generation is due to a breakdown in communication between generations and family members. Involving children early on in the decision-making process provides a wonderful opportunity to nurture family relationships and develop those essential communication skills.
In leading by example, parents can teach their children what they do and how they work with others. This is especially relevant when other parties are impacted in the transition, for example employees and business partners. From the perspective of the next generation, it is very important for them to feel that their opinion and perspective is heard and valued in the family.
Effective wealth planning conversations can help achieve many critical goals, including deepening individual members’ engagement in collective financial efforts, and building a better future your family.
Katie Brody is an Executive Director and Market Team Lead for Pasadena at J.P. Morgan Private Bank. She leads a local team of bankers who guide affluent individuals and families in making complex financial decisions required to grow and protect their wealth.
The strategies discussed often involve complex tax and legal issues. Your own attorney and other tax advisors can help you consider whether the ideas illustrated here are appropriate for your individual circumstances. JP Morgan Chase & Co. does not practice law, and does not give tax, accounting or legal advice.
