by David Gage and John Gromala
They had labored through two years of estate planning, and all for nothing, or worse than nothing. Let’s call them the Andersons–two elderly parents with $14 million in assets and four adult children. The parents had begun seeking input from their children early in the process since the children had considerable financial expertise and substantial estates of their own. A lot of money, heirlooms, and a business were at stake.
The six family members individually retained a total of 11 attorneys, accountants, and financial advisors. Those experts met repeatedly with their respective clients, corresponded among themselves, and circulated their proposals among the family members. Despite so much work (and expense), an estate plan satisfactory to everyone in the family was nowhere in sight. Feelings were running high between the generations and among the siblings, who were also bickering with their spouses.
Trust is always tested under such circumstances. In this case, as often happens, bringing in a phalanx of expert advisors complicated matters. In their negotiations with one another, all the advisors zealously sought only what was best for their own clients. They all assumed that everyone was playing a zero-sum game: what one Anderson got, another Anderson lost. Some family members began to feel as if they were trapped in a war zone. No one really understood what was happening, or why.
There was a fatal flaw at the heart of this misbegotten exercise in estate planning. No one was thinking about the welfare of the entire family–no one was thinking about what could be done for the mutual benefit of all the Andersons. Without such a flywheel to regulate it, the estate-planning process had spun out of control.
Conflict is natural and normal in even the happiest and most loving of families. It’s how people deal with conflict that makes all the difference. Resolve the conflict and you prevent a feud. Avoid conflict and antagonism simmers until it explodes.
Most families work hard at avoiding conflict, rather than resolving it. They may sweep disagreements under the rug, or ignore the intensity of a family member’s feelings, or minimize the significance of a problem–or just pray that it will go away. Family conflicts always re-emerge, though, most conspicuously after people die and their heirs contest a will or trust. In most cases, conflict was building long before the document was signed.
Attorneys, accountants, and financial advisors are not well suited to defusing such time bombs; they are charged with the more specific task of preserving assets and minimizing taxes. Likewise, attorneys are responsible for preparing an estate plan that will distribute the assets in accordance with the wishes of the parents; the mothers and fathers, jointly, are their clients. Attorneys avoid separate confidential discussions with each parent–and they certainly cannot have such discussions with the children–or risk a serious conflict of interest.
Many parents try to head off a crisis like the one that roiled the Anderson family by keeping their estate planning a secret from their children. In lieu of a plan that takes into account their children’s differing circumstances, such parents may adopt a plan that treats each child equally. Often, though, equal is not the same as equitable. For example, one child may have obligations that make it important that he receive his inheritance as soon as possible; another child may have all the money she can use and want her inheritance to go directly into trust for her children.
Although estate planning is intended to preserve family assets, the process too often fails to adapt itself to the individuals involved–who are, after all, the family’s greatest asset, its human capital. Estate planning should deal with relationships as well as dollars. In the Andersons’ case, restrictions–self-imposed, as well as legal–on communication made it next to impossible for the advisors or the family members themselves to learn what each family member really needed from the process.
The parents, children, and spouses all had emotional needs that were not being met. Some of those needs were cloaked in dollar demands that alienated everyone else because they seemed so irrational and selfish. The more extreme that family members got in their demands, the less they cared about one another. Someone in the family recognized that the process had gotten away from them and suggested that a mediator assist them collectively with their negotiations. Despite some family members’ protests, two co-mediators were hired.
When the mediators met with the entire family, they found people who were afraid to talk about much of anything–so the mediators insisted that everyone talk, and that they listen to one another. Some misperceptions were cleared up immediately. Then the mediators met with the family members individually.
It is in such intimate settings that the real story usually gets told, often after considerable effort by the mediator. People do not always know what their real interests are; their hidden agendas may be hidden from themselves as well as from everyone else. All discussions with the mediator are confidential, permitting each person to speak candidly without fear of embarrassment or retribution. Mediators have no allegiance to any one person and make no decisions–they cannot have conflicts of interest. They can work zealously for the good of everybody involved–the entire family.
In family estate planning–and, for that matter, in families in general–one or two issues usually block everything else. It seems to family members that there are a hundred issues, but that is because one serious misunderstanding can lead to dozens of minor ones, just as an accident on an exit ramp can tie up an entire freeway. A hidden issue creating an impasse in the Anderson family involved a business founded by the father. For the past 15 years the youngest son had been giving his father considerable strategic and managerial help with the business, to the detriment of his own business and his relationships with his wife and children. The father wanted to recognize his son’s contribution by giving the enterprise to him. That was creating strong feelings among his brothers and sisters, and even his mother had reservations. It finally came out in an individual session that the son actually hated the business and wanted no part of it. He had been keeping his feelings to himself because he believed that his father attached great sentimental value to the business and would be deeply hurt if he knew how the son really felt.
The irony was that the father had continued the business for the last few years because he believed the son loved it and wanted to inherit it. The father had grown tired of the business, and his emotional ties to it had died long ago. Having discovered this critical piece of information, the mediators helped father and son open a candid discussion. The solution quickly became self-evident. With that issue (and another long-term rivalry) resolved, a complete picture of the Anderson family’s goals quickly emerged. A memorandum of understanding signed by all family members was forwarded to the advisors. The parents’ attorney, after conferring with his clients, prepared an estate plan that satisfied the entire family.
By making it possible for everyone to communicate openly, whether individually, in pairs or small groups, or with everyone present, the mediators got the Andersons to address all the taboo topics. They created a safe haven by being neutral–by working for everyone. When people enter a safe haven that mediators have created, they lay down their arms. They stop feeling like adversaries and begin feeling once again like members of the same team–like members of a family.