Posting by Ed Kopf, Ph.D., Principal at BMC Associates
Many families find that multi-generational wealth is a two-edged sword. It presents great opportunities for enriching the lives of those who create the wealth and for their descendents. But it can also become a source of dissatisfaction and dissension. The following short story describes how one (fictionalized) family allowed their handling of inherited wealth to begin to erode familial trust and unity – and how they found their way back to their accustomed mutual confidence and caring.
Part One: The Challenge. Amy, Brad and Charles Nash could only count themselves fortunate. The sale of their grandparents’ and parents’ businesses had yielded nearly $100 million. Through trusts and bequests, each of them would eventually receive more wealth than they felt they’d ever really need. In fact, all three were delighted that most of the proceeds from the businesses went into a foundation. This had enabled them to participate together in philanthropies about which they felt deeply. Then why were they increasingly at each others’ throats?
A key reason for the tensions was that their respective financial needs were growing and their future inheritances didn’t pay today’s bills. The Nash siblings were now in their forties. They all believed that the family’s wealth should help their children get off to a good start in life – benefiting from a superior education and receiving financial help as they established their careers and families. Amy, Brad and Charles also had heavy expenses related to living in the community where they had grown up. Greenwich was the Nashs’ town and their houses were all within a quarter of a mile of their childhood home. No one wanted to deprive their children or themselves of this intimate family lifestyle. But, based on their current incomes, each of them was struggling to meet these not unreasonable expectations.
There was an apparent solution to this dilemma. Their parents, Esther and Phillip Nash (divorced and each remarried), both wanted to help their children out. When approached, they had always made generous gifts to their children and grandchildren. But in recent years, this pattern was breeding tensions among the family members. Among other things,
- Charles was uncomfortable with the thought that Amy’s four daughters – in private primary schools – would collectively be consuming much more of the family’s financial legacy in the coming decades than his son who was now out of state college and insistently self-supporting. That didn’t seem fair.
- Amy wasn’t sure; but she suspected that Brad’s (to her mind) extravagant addition to his house had been paid for by their parents. That didn’t seem equitable.
- In general, the siblings believed their parents intended to treat them equally in their estate planning. That seemed right. But weren’t these gifts depleting their inheritance in an unintended and unbalanced way?
- Esther and Phillip, increasing concerned about their own health-related expenses and the future of their respective spouses, seemed less-and-less comfortable with the situation. Over all, the children’s requests were becoming more frequent, larger and less predictable. And the children seemed uneasy about all this.
- Above all, all of these financial matters were shrouded in mystery. It wasn’t quite right to speak about one another’s money matters. Esther and Phillip didn’t know what each other was doing for the children and the grandchildren. Charles, Brad and Amy were growing acutely curious about one another’s past benefits and suspicious about one another’s future intent. But no one was prepared to talk openly about it.
The disposition of the wealth that did so much good for the family was now beginning to erode the trust and goodwill that were the very core of its identity. This had become evident to everyone. But no one knew what to do.
Part Two of this post describes the Collaborative Estate Planning that got the family back on track.