How many books, movies, and TV shows have drawn in audiences with the family drama of the ultra-rich? These stories often center around inheritance and succession squabbles and family fallouts from poorly managed estates.
Without careful estate planning, you might face high estate tax bills and the potential loss of valuable assets. Even worse, these situations can devolve into bitter infighting among family members, breaking familial bonds that took generations to shape.
At Tencap we want to prevent you from facing such issues – at a minimum we want to show you several ways we have created planning that brings families closer together. With extensive experience managing high-net-worth individual (HNWI) accounts, we understand the unique challenges that come with substantial wealth.
Before we move onto the next section of this article, I would like to share a few of the ways we help bring families together in managing an estate. 1) Education. Tencap has several workshops that we personalize for families and walk them through. By bringing a family (often siblings) together for interactive educational workshops, we see that families come together, talk with each other, problem solve and share ideas and opinions.
One more thing to say about this education. From years of doing these workshops I want to share a favorite discussion of the group. Getting clear on your purpose for money! So often we are all running around trying to amass money, but having put little thought into why we are working to create wealth. Set aside the “I like nice things” language for a moment, and really get clear about what your true purpose for money is? Suffice it to say, this is always a powerful discussion.
2) Business management. We bring families together by helping them manage their inheritance and associated responsibilities, together. There are often many “to-do” items each year in managing a sizable inheritance. Tencap will often schedule time to bring the beneficiaries together to work through the business/accounting side of things. For many of our clients, their wishes are that their estate and the management thereof will help to bring their kids together. Tencap is proud to be facilitating some of those wishes and we have seen powerful and productive ways to create bonding through the work.
What else is relevant and important as you consider your estate planning? Here are some common estate planning mistakes you may encounter and how to avoid them.
How is Estate Planning Different for the Ultra-Rich?
Estate planning for the ultra-rich is different from sorting out who inherits what. For starters, family dynamics among the wealthy can be incredibly complex.
Multigenerational wealth transfer isn’t just about passing down money—it’s about guaranteeing that assets continue to grow and support the family for generations. This process means crafting a plan considering the needs and aspirations of children, grandchildren, and even great-grandchildren.
The ultra-rich also often have intricate asset structures, including multiple properties, investments, businesses, and international holdings. Managing and distributing these assets while ensuring the optimization of taxes requires the utmost precision and expertise.
Without a solid estate plan, these families could face astronomical estate tax bills that may significantly diminish the wealth everyone worked so hard to build. Conversely, proper planning ensures a smooth transfer, maintaining future generations’ legacy and financial stability.
8 Estate Planning Mistakes of the Ultra-Rich
If you plan on passing on your family’s wealth, here are some of the most common mistakes you should avoid:
1. Lack of a comprehensive estate plan
Having a will is just one piece of the puzzle in a comprehensive estate plan. A thorough plan includes trusts, powers of attorney, healthcare directives, and more.
For instance, without a trust, assets can go through probate, becoming public and potentially causing family disputes. Comprehensive planning ensures all aspects of an estate are covered, providing clarity and direction for heirs.
2. Not taking business continuity into account
If you have significant business interests, failing to plan for business continuity can be disastrous. Imagine your thriving family-owned business suddenly faltering because there’s no clear succession plan. Vital employees might leave, operations could suffer, and the business value could plummet. A detailed succession plan ensures that the company remains operational and profitable, preserving its legacy.
3. Neglecting the financial education of the next generations
Passing on wealth is one thing; passing on the knowledge to manage it is another. Many ultra-rich families fail to educate future generations about financial management, leading to squandered fortunes.
For instance, successors who don’t know how to handle large sums of money might make poor investment decisions or indulge in frivolous expenses.
It also pays to educate the heirs of your heirs, maybe even more so. Losing generational wealth by the third generation seems to be a universal misfortune, warranting aphorisms from both Eastern (“Wealth does not last beyond three generations”) and Western cultures (“Shirtsleeves to shirtsleeves in three generations”).
Involving your heirs in financial education programs and estate planning discussions can help them become responsible stewards of family wealth.
4. Choosing the wrong trustee
An ill-suited trustee can mismanage the estate, leading to financial loss and family strife. Choosing a family member or a trusted confidant who lacks financial expertise or objectivity can result in poor decision-making and conflicts of interest.
Alternatively, you can appoint professional trustees with the experience and impartiality to manage the estate effectively so no one in the family can accuse them of having biases or agendas.
5. Forgetting to update the estate plan regularly
Life changes—marriages, divorces, births, deaths, and changes in financial status—require updates to an estate plan.
An out-of-date plan can lead to unintended consequences, such as an ex-spouse inheriting significant assets after a divorce. Regularly review and change the plan to reflect your current wishes and circumstances.
6. Overlooking tax implications
Ultra-rich families can face hefty estate taxes. Without careful planning, most of the estate could go to the government instead of your heirs.
Strategies like gifting, charitable donations, and establishing trusts can minimize tax liabilities. For example, you can provide income for your successors while reducing estate taxes when you set up a charitable remainder trust.
7. Failing to plan for incapacity
Estate planning isn’t just something you need to think about in the event of your passing. A sudden illness or accident can leave you unable to handle your affairs. When that happens, legal authorities may appoint a guardian to look out for your best interests.
Ideally, you grant trusted people powers of attorney and establish healthcare directives so that they can make decisions on your behalf if something unexpected happens.
8. Underestimating the value of professional advice
The intricacies of estate planning mean you need professional advice. Relying solely on DIY methods or generic plans can lead to costly mistakes. Estate planning lawyers, financial advisors, and tax professionals have your best interests at heart and can provide tailored advice.
An estate planner can draft customized trusts that address specific family dynamics and asset structures. Then, you can transfer wealth more efficiently with minimal fuss and legal complications for your family.
A Legacy That Goes On
Mistakes in estate planning could lead to many issues and strain your family’s wealth. Failing to account for and strategize around these common errors can jeopardize your legacy and leave your successors with nothing.
Tencap’s experience handling high-net-worth individuals and families can help you plan for succession to make it as robust and future-proof as possible. You can learn more about the benefits of our services in our article, 7 Reasons Why Our Advisory Services Are Worth the Fee.
Secure your family’s future with Tencap’s wealth coaching services and ensure your legacy goes on for generations. With our comprehensive approach to wealth management, our clients come to see there is so much that we are able to provide each client; our value and wisdom is an array of categories (tax planning, insurance planning, estate planning – outstanding education and coaching) all pull for a remarkable experience and clear value for our clients and their families.
Call today to schedule your no-cost consultation and interview our firm. We are prepared to teach and coach on how we are a qualified team that will serve you well.
Joe Griffin
Joe has been building and managing financial planning firms for the past 13 years. He loves the financial planning space and is very proud of the success and growth that has come from his proprietary marketing and leadership. Joe spent years being involved with the bright minds of the investment committee at Utah’s 529 college savings plan – a plan managing over 20 billion. Joe only works with firms that are stated fiduciaries on a client relationship. Joe is committed to leading a financial planning firm with ethics and integrity. The money management philosophy that Tencap subscribes to is built on strong academics and is supported by a highly impressive academic board. We can't wait to coach you on the excellence that Tencap stands for.
