Discussing Family Money Without the Family Drama

By PAUL SULLIVAN
LOVE, Erich Segal wrote in 1970, means never having to say you’re sorry. The same can be said about the money amassed by the baby-boomer generation in the last four decades, or about their heirs’ view of it. Many parents remain reluctant to talk about how much money they plan to leave their children, and that can lead to conflict among siblings and hurt feelings long after the parents are gone.
While talking about money has long been taboo, not discussing what you have — particularly when you have a lot, or if your children think you do — is not going to make the problem go away. In most cases, advisers and psychologists say, it just makes things worse.“The major problems happen when money is not talked about,” said Eric Dammann, a psychoanalyst in New York City. “They’ll set up this whole estate plan, but won’t talk to the kids about it. Then Mom and Dad die and there’s a reading of the will and it’s a surprise.”Mr. Dammann said that the worst situations were when the parents knew one child had been more or less financially successful than another.In those cases, an estate can be more than a sum total of assets. It often becomes about love or lack of it, control, power and many other emotions you would rather not have arise after your death.

“When you don’t have those discussion, you use money as a lens to see all these other issues,” said Coventry Edwards-Pitt, managing director for Ballentine Partners. “It becomes a proxy for so much else.”

So what is the best way to talk about what you have?

For an industry that spends so much time talking about estate planning, its answers were remarkably thin. Advisers agreed that having a conversation was important, but stressed that this was not as easy as it sounded.

“The older generation is tough,” said Lisa Roberts, managing director and head of the northern California region for Citi Private Bank. “They’re in the mind-set of, ‘Let’s create a trust and you get a third at 30, a third at 35 and a third at 40.’ ”

Ms. Roberts said her younger Silicon Valley clients were more open to the discussion, asking her what the right age was for discussing the wealth they had and what their children might expect.

Again, though, her answer did not provide an easy script to follow: “We say, ‘What are the capabilities you want them to have, and what confidence do you want them to demonstrate with money?’ ”

One bit of advice she had was to be mindful of the tone. There is a risk that a parent will come across as too controlling. That is why wealthy families often use a discussion about philanthropy as an icebreaker.

Another suggestion is to create a family mission statement, which is less fuzzy than it sounds. Such an exercise is a way for children to participate in the discussion with their parents. And the outcome is often surprising.

Ms. Edwards-Pitt said that, after a three-hour meeting, one family came up with 10 things that were crucial to them. “One was they wanted people to be independent, but they could see the money the family has as a safety net if someone is in need,” she said. “They were really parsing through how to convey love in the family. We were able to show that all of the estate planning derived from this goal.”

Having an open discussion about money can also surprise heirs. As Ms. Edwards-Pitt pointed out, a bequest of $5 million to a child amounts to $90,000 a year in interest, if the principal is left untouched. That is not pocket change, but it is still less than the list price of a new Range Rover.

The reality is that many children have made back-of-the-envelope calculations about their parents’ net worth and how it is going to affect their lifestyles.

A frequent excuse for not talking about inheritance is the complexities of gathering up the documents. But better sooner than later. When Carol Kaufman’s mother died and her father became mentally impaired after a car accident in 1994, she spent the next 15 years trying to locate every document. Even though her father had told her about the location of key documents, his last update had been five years earlier.

“There were so many pieces missing that Dad couldn’t tell me about,” she said. Even now, two years after his death, she said she is “not 100 percent sure we identified everything.”

And the experience of trying to piece together her father’s estate still bothers her. Last year, she took what she had learned and started CareBinders, a database aimed at keeping all of the essential data in one place.

She now counsels people to think of the process of gathering documents as a way to talk about estate issues. “If it can be a feel-good process, where the parents and children are together over a holiday, it’s better,” she said. “We need to turn it around so there isn’t a black cloud over the conversation.”

A few years back, she talked to her own son, now 29, about her wealth, having sold a software company she owned to SunGard in 2002. “He’s never really been interested in how much money I have,” Ms. Kaufman said. “When he comes home, he wants to go over his savings and make sure he’s doing what he should.”

Ms. Kaufman took a practical approach to an emotional subject. Another way to think about the talk is as an obligation. Responsible parents talk to their children about the birds and the bees, even though it is often awkward. In the end, the same holds true for an estate: avoiding a discussion about your money will not keep your adult children from thinking about it. It’s better to talk about it than let them try to figure it out on their own.

A version of this article appeared in print on November 5, 2010, on page F2 of the New York edition.
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About melvynburrow

Attorney and CPA services.
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