FAMILY OFFICE INSIGHTS

How strong families survive tough times: generational wealth – part one

Creating a family legacy can have its share of challenges. We sat down with Tom Rogerson, President and CEO of GenLeg Consulting to discuss pragmatic ways to avoid the hidden pitfalls families often face when developing generational legacies. In the first of a three-part series, SVB Private’s Gerald Baker and Mr. Rogerson discuss strategies you can use to overcome the issues that may stand in the way of generational wealth in your family. Listen now.


Transcript

Gerald: Hello, and welcome to "Boston Private Perspectives." I'm Gerald Baker, head of Trust & Fiduciary Services and co-head of our Center for Wealth Planning Excellence here at Boston Private. Thank you so much for joining us today as we discuss "How Strong Families Survive Tough Times." Not only am I excited about the interesting topic we're discussing. I'm thrilled to be joined by an expert today, Tom Rogerson.

Tom: Hello, Gerald.

Gerald: Hi, Tom. Tom is the president and CEO of GenLeg Consulting, an organization that helps families understand the pitfalls of creating a generational legacy, and then assists them with implementing best practices to avoid them. So, Tom, let's just dig right in and get started. Can you tell us a bit more about your background and how you were led to this area of work that you're doing today?

Tom: Sure. Yeah. My background was really in the estate tax planning area, much like yours, actually. And I was a national director of estate tax planning at Kidder Peabody for people that remember way back when. And went on to BNY Mellon and State Street Global Advisors in between, and then ended up in Wilmington Trust Company, all of which I was involved in estate tax planning. But going back about 25 years ago, I started transitioning what I was focusing on from what I now would refer to is instead of preparing the money for the family, preparing the family for the money. And so I've been really focusing on what now would be referred to as family governance or family dynamics around wealth for almost 30...more than 30 years, actually.

Understanding the varied implications of wealth within your family (Timecode: 22:10)

Gerald: That's pretty interesting. And you know, it's what you say about preparing a family for money is really so apropos. Because everything we do in our every day is to make sure that folks understand the implications of their money, not just from a tax strategy standpoint, or an estate tax strategy standpoint. It's really how do you handle the money and what do you do with it, and how does your family handle it and deal with it? So, you have this unique perspective of the very tax and technical component of it along with the perspective of the soft skills of the family dynamics and governance. So, what would you say are some high-level important observations, the difference between traditional tax planning versus planning that includes governance, culture, and legacy planning?

Tom: Well, I think the big picture is that here, looking at the old shirtsleeves to shirtsleeves paradigm that people would refer to, a lot of the original research was focusing on that paradigm from the standpoint of why are families losing their money and their businesses so quickly? And I, too, was thinking the same thing way back when, when I just started out in the estate tax planning field. But the original research that I was looking at 30-plus years ago now that blew me away was recognizing that it wasn't because they were doing bad planning that was causing the bulk of families to lose their wealth. It was because they were losing the sense of family. They were losing connection. And it turned out that the line that my wife that I use often for this is that, "A strong business cannot hold the family together, but a strong family can hold a business together." And the same thing holds true of trusts, and the same thing holds true of a family office. But the idea of holding the family together in difficult times is really important if you want to preserve the money, but that's the less important part. It's really important if you want to preserve the family. And that's why I've focused on this area and why it's so important now more than ever, perhaps.

Gerald: It's interesting that you mentioned that because oftentimes people think you accumulate wealth or you hand wealth from one generation to the next and the family is going to be fine. They never necessarily think about the wealth being a component of challenges of the inner workings of the family within one generation or across multiple generations. That is a really good analogy with regards to a strong family can keep a business together but a business can't keep a family together. You broaden that more broadly and wealth doesn't necessarily keep a family together but family can help keep the wealth together in the family. So, you deal with families and family offices on a daily basis. This is sort of the core of the value proposition that you work with every day. What are some top-line observations that you would have as to why wealthy families fail at preserving both their tangible and intangible wealth? And what are some of the strategies you use or help introduced to those families looking for ways to mitigate those risks?

Why do families fail at preserving their tangible and intangible wealth? (Timecode: 25:30)

Tom: Great. Yes, good question. Well, I think the big picture observation that we've had really came about just from my own experience with my father's family came from a very wealthy family. But my mother's family came from a very low-level income family from Cuba, actually, with eight children to boot. So, there really wasn't a lot going on. And when I started looking at the research of families and culture within families, what was starting to be quite evident is that low net worth families have tremendous interdependence where they learn how to work with each other, by necessity they have to, and they may not like it, but they know a lot about each other. Dinner table conversations in a low net worth family are very consequential. When Johnny says, "Can I borrow the car on Friday night?" everyone gets involved because it's "the car." And when Jill says, "Can I go to college?" everyone gets involved because if she goes to college, their lives are going to change.

And they negotiate every day, they make decisions on who gets a bathroom first, and who shares a bedroom and not, and you name it, they often have summer jobs where they are working from home. And I say all this because if somebody in that family has abilities and hutzpah, and they make some money, and they become an executive at a major corporation, or they become an entrepreneur, and they build a business, they want to get away from all that hardship. And they want to raise their children to be independent. And that's, kind of, the American dream.

Well, independence is great, except when it fully cannibalizes interdependence. And that's what ends up happening is the higher net worth families often use their wealth to allow more independence to the point of...my wife and I would refer to it as estrangement from each other. Dinner table conversations in a higher net worth family are less consequential. They're very pleasant, usually. But it's things like, how's your golf game? How's your tennis game? These children often have their own bedroom, they might even have their own bathroom, sometimes suite. And very often they go to summer camp, more and more opportunities to make fewer decisions together.

And the last thing I'll say about this, the reason that's so important is in probably the biggest study done so far on families that had financial resources and what happened to them found that the biggest reason that they were failing, 60% of the failure. According to the original research, we're finding it's closer to about 50% from the wealth that we've been doing, but still, it's a very high percentage, direction they were totally on, but the biggest reason for failure, 50% of the failure was due to lack of trust around group decision-making.

And what did I just say about a low net worth family versus a high net worth family? Low net worth families had to make decisions every day and they learned how to do it. High net worth families didn't have to do it. And yet those are oftentimes the very same people we're going to leave assets to that require group decision-making, but they have no experience at doing it. To me, that's the biggest conundrum. And how do we then tackle that? But wealth doesn't cause the problems that wealthy families have, wealth allows them to separate enough and the separation often causes the problem.

Gerald: Yeah. It's so true. In my experience at Boston Private, and a long career before that, it's the independence that wealth creates that allows individuals to operate independently, right? So, when you do have to come together for an estate to be settled for one trust to fund other trusts, and heavens forbid, it might be a pot trust where all the beneficiaries are working out of the same pool of money, that collective decision-making and collective communication about collective decision-making are really the crux of the problem. It's not the wealth. It's not the individuals or the broader family. It's the lack of experience and understanding of how to work collectively that...I think you put it beautifully when you said that independence oftentimes can result in cannibalizing the interdependence, right, through that wealth.

And you put it really, really well, Tom, when you said, you know, wealth affords independence that oftentimes cannibalizes the family's interdependence. And that really just sums up a part of the dynamic and the lack of understanding of what communication and family governance through communication really needs to be. So, you really hit the nail on the head there. So, if you don't mind, I'm going to pepper you with a few questions related to that very premise and topic.

Reasons to bring in an expert when building a family legacy (Timecode: 30:16)

So, why work with an expert? You know, really what steps do you recommend families go through and why they should work with an expert on building generational family legacy?

Tom: Yes. Great point. And I think it comes down to that low net worth families had to build interdependence by necessity. If a high net worth family is to try to introduce interdependence, the participants have to do it voluntarily. And if you're going to voluntarily do something, somebody has to build the case of the importance of it and encourage you to get involved and to build the case. It's hard for the parent to be the people that do that because the parents were part of building the culture over there, you know, raising their children's lifetime. And I often tell parents, when I get into some of this material, you may have the right message by having listened to what we've talked about, and maybe, you know, interview, read a book or two, but you may be the wrong messenger to get this process started in your family.

And so, we're often recommending that yes, to get started, it makes sense to bring in someone that can help a family start to change the culture where everyone's a willing participant. You can't force them to do this. And that does require this kind of change. And so that's a meaningful part of what I think allowed me and my wife to eventually really specialize and this is the point that we now just formed a consulting company just to specialize in helping families in this area, and be able to partner with Boston Private. And we think that that partnership is really indicative of a change of the, kind of, professional...the view of professionals.

So, historically, the professionals we thought of when it came to estate planning was who's my attorney to minimize taxes, tax mitigation? Who's my wealth manager to focus on the investment? They often think of that as separate because the wealth firm may do some planning but they often don't write the document themselves. So, the attorney and the wealth advisor, and then the accountant. And what people don't recognize is maybe to get going, there needs to be a fourth advisor. And that's a legacy advisors to help pull this from a family perspective together.

I like to view it this way, when we get a family together, one of the things we're focusing on, it's really important that they as a group defined the purpose of their family. And they as a group defined, if there's any wealth, not saying there is, but if there's any wealth, what is the purpose of the wealth vis a vis the purpose of our family? And that information would help the trustee, would help the estate tax planner, would help the accountant understand how better to organize a plan, rather than just go by tax mitigation alone.

Defining the purpose of your family with a mission statement (Timecode: 33:08)

Gerald: You hit the nail on the head of something that is definitely core to Boston Private's value proposition when we start...as you well know, Tom, when we start to engage with clients on their broader planning, the first thing we try to do is work with them to build a mission statement.

What do you want to accomplish with this wealth for yourselves, for your immediate family, and for generations to come? And then what do you want them to take out of the meaning of that mission statement? Because you can put words on paper, and you can talk to people about it, but until they understand the meaning and worth behind the words on that paper, and how the matriarch or the patriarch, or this, the current generation passing it on really view it, you're going to be talking in circles around each other.

So, that brings me to a really interesting question that I often get asked myself, and I'd love to hear how you answer this is, is there one way to talk to families about this? Do you treat each family the same, is it an identical process? Or is it iterative, depending on the circumstances?

Tom: Again, great question. And it is iterative depending on the situation, family and how they were raised, what the culture of the family is. And in some families, it's a lot easier to get started because the culture is just at a higher plane. And most families think their culture is much better than actually is. Remember, a higher net worth family has the privilege of growing apart a little bit, they don't know it, they just don't know each other as well as they think they do. They have more social conversations and they're usually in a conflict avoidance modality whenever possible, and wealth allows him to avoid conflict much more.

So, getting them to recognize it's time to get back to the table and figure out a way to...You know, I often ask families, what's your method of practicing and managing conflict that you've solidified, that's worked for you and which ones did you try that didn't work? And they look at me like what? Practice and manage conflict? No, we avoid. Well, avoiding conflict doesn't solve it. It just lets it fester. And then when people get old enough, and they have a little bit of wherewithal, they can use the resources to separate.

So, I think one of the things that we're recognizing is, and I love the partnership with Boston Private, as you said earlier, you help families create a mission statement, which is getting to that purpose, what is the purpose of the wealth? And your whole campaign of the why of wealth, it's the why of wealth. And it used to be, before there were estate taxes, there was the estate planning, but it was about the people and the purpose and the values. And literally, if you read wills that go back to the beginning of the turn of the century, 1900s anyway, early 1900s, before there were estate taxes, they would actually, in the document itself, talk about their intentions, their purpose, their desires, their goals, their fears, in the document.

Nowadays...I often tell clients when I see them, if I rip the front page off your estate plan and the back page of your estate plan, which is normally where they have their name, and shuffle it with 20 other estate plans, you couldn't pick it out, there's no you in there. It could look like all you cared about was tax mitigation. And that's why, again, because your focus, as a trust company and as wealth manager, is to really help people understand the why of wealth as part of it. It just was music to our ears, the work that we do.

Gerald: I would say we approach things in a very complementary way, which is why we're so excited to have this partnership with you and GenLeg. So, all of that sounds wonderful, right? You sit down with families, you help them understand what their why of wealth is, you get to understand the emotional underpinnings of who they are, why they do what they do, the conflict mitigation, or in a lot of cases, avoidance strategies. But there have to be challenges. There can be fraught with challenges throughout that entire engagement and discussion process.

Understanding the hidden challenges of family planning discussions (Timecode: 37:22)

What would you say are some of the most common stumbling blocks that you experience in working with high net worth and ultra-high net worth families?

Tom: Well, there are so many. We actually have an assessment that we send out to families ahead of time. And to give you an example of how each family is different and how they end up then setting by their own assessment, the agenda for where they should start. So, we have a list on one of the assessments of 20 statements that we send out to everybody in the family, and the statements from the course from things about, do I know the kind of causes that you give to and are passionate about? All the way to things like, do I have a place in this family? I feel a sense of purpose and mission and people know my strength and I know their strength, you know, things of that nature and everything about money and about business.

But what they have a chance to do is grade on one side of the page beside each one of these statements, how important would it be for us to get to what this statement is indicating to, you know, like the one about I know their strengths, and they know mine, and we work really well together as a team. How important would it be for us to get there? And on one side, they might grade that a five on level of importance. But on the other side, they might grade it a zero at the level of accomplishment. So, on one side, they're grading how important it is, the other side, they're grading how well we're doing at it. And we then gather up all that information, tabulate it, and we can come to the family and show them, these are the issues that relate to you. But they usually do relate to communication.

Because they haven't made consequential decisions together...and that's different than just thinking we socially talk well together. Because they haven't made consequential decisions together, they actually don't have trust. Doesn't mean I don't trust you, love you, you're my brother, you're my sister, but they don't trust each other's communication in regard to a group decision because they just don't have experience doing it. That's a critical one. Parents maintaining control too long, and not letting the children start to have leadership roles. One of the quotes that we use a lot with families is, "Wealth without responsibility or authority is a formula for resentment and failed self-worth." Well, how do you give children and their spouses responsibility and authority without giving them control of the kingdom and the goose that lays the golden eggs?

Well, there are lots of ways to do that, but most families don't have a clue so they don't enter into it. So, parents not giving up some control, letting the children step into control is another big one. But you'll see that they just think they know each other really, really well. But usually, the entrepreneurs we work with know their management team members better, more deeply than they know the passions of their family members, which is bold to say, but we're finding it to be incredibly true.

Gerald: That's a really interesting perspective because if you sort of have to boil that down to a root cause, it's constructive, engaged communication, right? Those entrepreneurs are used to needing to have to do that with their management teams, those wealthy individuals are used to having to do that with their professional advisors, but not necessarily fostering that type of communication with their own family members as it relates to family wealth. And I imagine that being such a fraught topic as it relates to emotion...because you can separate business fairly directly, right? This is about numbers. This is about the bottom line. This is about company performance or investment returns. When you add in the other family dynamics of emotional relationships and the challenges of that type of engaged communication, you must feel sometimes like you're dancing around a minefield.

Tom: Yeah. Absolutely. I remember when I first offered to do this, when I first...way back when I was at State Street Global Advisors, we had a high net worth family that said, "My kids don't know anything about estate planning or wealth and the taxes and they're always fighting against me and what to do with the money. And would you come in and just, you know, show them the estate plan and talk to them about the whole thing?" And he would tell me these stories about the fights they would have over money issues and all. And with fear and trepidation, I said, "Okay." And I went, and I ran my first family meeting. And this goes back decades ago. And I remember going just totally nervous beyond, I'll get it...Why am I getting...? I have enough difficult with my own family dynamic, why am I getting into their family dynamic?

The benefits of a family facilitator (Timecode: 42:06)

But what I found was, there's this whole thing about having a facilitator. If you have a blind, mute, deaf facilitator in a room with a group of people that are having an argument, and they're told this person is observing, you know, your process, they actually act better, even if the person's blind, mute, and, you know, to get...And I found the same thing to be true that actually being a third party just caused everybody to want to act better. And it allowed us to have a different starting place as a group.

So, I find that getting into the family dynamics of other families, it turns out, has been incredibly rewarding at the end of the day. When I used to help people just with the money, when I was originally doing the estate planning work that I was doing, and minimize the taxes, they would thank me at the end of the day. But when I started helping them with the family, and to see broken relationships starting to come together again, you become a family member. And so we now had a chance to work with over 270 different families at running family meetings. And it's so rewarding to change that dynamic wherever you can.

Gerald: I can only imagine just to start with one family and see the evolution over time of communication and engagement, and being able to share ideas effectively must be terribly rewarding. So, in that, though, are there minefields that you absolutely want to avoid? Are there certain topics that just, don't bring those up at a family meeting, maybe have them one-off with individuals or with smaller subgroups? But is there anything in general that you found as a trigger that, sort of, takes things off the rails?

Tom: Well, the parents, often they hear things, and the press makes all kinds of statements like this, you need to tell your children about the estate plan, tell them about the money, talk about the money if you're in a wealthier family. I actually find that because the parents don't know how to talk about it, they engage in that conversation too early. I'm not saying you...Here, I'm a big advocate, you've got to talk, right? But I think you work your way up to talking about the money itself. First, it's who are these people? Do I really know who they are? What their motivations are? What their strengths are? What their abilities are? What their vision, their values? You know, if the family focuses on those conversations first, first of all, it's less threatening than opening up day one, let's talk about the money, here's how much there is, it's less threatening, and they can really all engage in it. And mom and dad don't usually mind talking about those things.

But the money they're worried about because as soon as we start talking about how much money we have, then spouses are going to find out or the kids are going to want a better car or things like that. And the parents are concerned about it. So, we often recommend starting with the conversation of who are we? What do we care about? That can over time lead to then them earning the right, and I word it that way, to learn about the money and the numbers. When you evidence you're responsible and able to hear about it, we can't wait to tell you, but we need to make sure you are participating in what it means to be a member of this family in order for us to be able to tell you what those things are later on.

Gerald: It is earning a right, isn't it? You know, you really have to...It's exactly like getting a job. It's exactly getting accepted to school, you have to earn that, right? It's not just handed to you. And that's part of that communication in family dynamic. It's so well put, Tom.

Determining the appropriate age to discuss family wealth with children (Timecode: 45:52)

So, with that, is there an age you should start talking about this, but not telling them about the money? Is there an age by which they should know everything there is to know?

Tom: Yeah. Well, our motto...People often ask that, you know, when's the right time to tell them? And I say, you tell them when they're ready to hear it. And so you can actually...I've seen...one family we worked with has a 12-year-old that I think it was totally appropriate to share some of the information about wealth with that 12-year-old, that is very rare. Normally, we wouldn't recommend that until about 20 or 25 sometimes. But other times, there are 30 and 40-years-olds that shouldn't know the numbers. There are some people that maybe it's because of a mental illness or just they don't have a filter.

And one of them is my...you know, one of my children...I adopted one of our four children. One of our daughters is from Russia and just has a really hard time closing down what...inappropriate conversation...She could actually bring up if she knew what the numbers were, she could bring it up at inappropriate times. And so she actually recognizes it's probably not right for her to know whatever there may or may not be coming down her pike, because it would be very hard for her not to share that. But that took a lot of maturity and conversation, not about the money, but about how do we work together? How do we work...? And it's been powerful to see how my other children recognize that now and see the need to help her in some areas.

These are the kinds of bonds that I say that are incredibly rewarding. I love what I do because I've been doing it for a long time now and I've had a chance to learn what families have learned the hard way. And I've been able to bring these lessons home and apply them to our family when they were much younger and build it up. It's not easy, it's just been easier than a lot of the families that we end up working with.

A more productive way to establish boundaries within a family (Timecode: 47:53)

Gerald: Is there ever a time that you should exclude a family member, a spouse, a child? Or is this an everybody-or-nobody type of conversation?

Tom: Again, great point. There do need to be boundaries. So, a family though if one of the children is acting up and the parent tells him, "You can't come to the family meeting," that isn't another example of a parent treating a child as a child. Parents getting into a process of treating children like children for the rest of their lives, then they set up a state plans that do the same thing after the parents are gone, they treat the children like children for the rest of their lives. Our big focus is how do we give them an opportunity to have a voice in the family? But if they are using that voice badly, there do need to be rules. But when the rules are being imposed upon the family member that's not acting correctly, they should be imposed by the group as a whole, then they're not fighting against mom and dad, they're recognizing, I'm not part of the collective. We had rules we came up with as a group, and they're holding me accountable to those rules. That's different than mom and dad just saying, "You're out, you're acting like a kid again."

Gerald; So, it all comes down to defining what governance means for the family and then making sure that decision-making is within the confines of that governance definition and structure rather than reverting back to that parent-child relationship, which is just going to add layers of emotion and complexity to that emotion to actually coming to a reasonable place for communication and decision-making. That makes so much sense.

Tom: Well, it's a great point. And that word governance, I just want to take a second on because that right away, it misleads a lot of family members. When I mentioned governance, many times people have a very different definition of they think some kind of highfalutin structure like we need a family constitution and we need, you know, all kinds of things with bylaws and written minutes for the meetings and all that. Governance is a very simple concept. It's how do a group of people, three or four people, make a decision together? That's governance. If we wanted to decide what time we're gonna have lunch today, or lunch tomorrow, and you know, three people in a family, that's governance. If we're going to decide what restaurant we're going to, that's governance.

Overcoming obstacles to family wealth preservation (Timecode: 50:20)

So, it's a matter of group decision-making. And that was so critical to me because if you go back to the number one reason that families were failing at preserving wealth and family, multi-generationally, was due to lack of trust or un-group decision-making, which is governance. That's why I think it's the right term. People just often bring more baggage to the term than is necessary. And that's why we do advocate, you know, letting people start making decisions as early as you can.

One addition to a question you asked earlier, the age issue, we find up to about 15, they're too young to really participate in group decision-making that have consequences and understand the consequences and all that. But from 15 to about 25, they absolutely can engage in group decision making where there are consequences and they can learn from the consequences and they can express their values and their communication style, leadership style. From 25 to about 35, we're normally focusing on how we're going to add people to this family because that's when they're getting engaged and married and having children. So, what's it going to look like? What's our onboarding process?

From roughly 35 up to you name it, it's a little bit too old to get together and say, we're gonna have a kumbaya experience and sit around, you know, campfire and toast marshmallows and sing the family song. And they just go, "Come on. Get real, we're already baked." But you can talk to them about how they're raising their children, and the hopes and dreams and aspirations they have for their children. And you end up kind of like starting over with that older group. So, it's almost never too early to talk about these things or engage, it's almost never too late. But it's different how you bring it in, depending on the ages of the participants.

Gerald: So very true. And I imagine that the earlier you start them in the conversation process, the easier it's going to be to help them be incorporated into that governance structure and style of communication and inter-family, sort of, planning to instill those qualities. So, you mentioned earlier in our chat about reading documents from the turn of the last century, which, you know, when I started my career, I had a large book of very old trusts from 1900 to 1930. And you mentioned a very important thing that there was a lot of intent in those documents, wishes, hopes, concerns, things that they wanted to avoid, things that they wanted to make sure the family did do.

And as tax became more complex and estate taxes got introduced, and it became more of a science to avoid for tax mitigation purposes, it became less of a plan to discuss how family governance should really be executed on, right? Which is really sort of what has evolved with estate planning over time.

Unifying your family with an augmented estate plan (Timecode: 53:17)

So, pointing out the obvious, what are ways that you can augment a traditional estate plan to prevent it from exacerbating, from lack of communication on intent and desires and fears and concerns, what can you do within the structure of a family and documentation and communication to, sort of, help augment what has become really a clinical exercise, if you will, of building the right plan to avoid taxes?

Tom: Again, that's a big one. But that's a great question that the whole notion of, to me, it gets down to the traditional estate plans, historically, especially in the last 50 years or so, with the estate taxes, mitigation, and so many different techniques to do it, some very complex and all. The actual documents itself that were dealing with these issues became quite complex and hard to understand, even for the advisors, let alone the client, I mean, they really became very legalistic documents. But the reason that families' traditional estate plans were failing was either number one, they would divide the assets by the number of children. My wife and I refer to this divide and conquer, you get three kids, it's third, a third, a third. And that's like, take this wealth that you may not be prepared for, and use it to essentially separate yourself from having to make any decisions with your siblings. And so they ended up all going off and making all the same mistakes because they weren't learning from each other, they didn't have a process of doing it.

The second reason that families or the estate plans were failing, or maybe the estate plan was designed to try and force interdependence by setting up something like a family foundation that they would put all the kids on the seats of the board with the intention, wonderful intention of getting them to make decisions together. But they ended up coming to that, though, with no experience of ever having made decisions before. And the first decision that we're trying to make is how do we divide this thing so I don't have to deal with you? You know, brother, sister, I love you, but I don't want to make these decisions with you because that sounds like a pain in the neck. And what experience do we have? And so they were not unifying.

Another one that they often do is they leave a vacation house to the next generation. Well, the idea there is that they're going to unify because they did when we had them up, they always loved each other, and they love the vacation house on the lake, or whatever. But we went from one couple having a vacation house and getting everybody to join in to now three couples sharing it. And inevitably, what they do is that I get it July, you get it August, and she gets it September. And what ends up happening is it's no longer unifying, it's actually allowing us to not spend time with each other because we each have at a different time. And so that was the second reason that they were failing was they were forcing integration.

And the third was most estate plans were not giving...either not using appropriate trustees or not giving the trustees the information they needed to really bless the family with the family input, you know, endowing the purpose of the family. And those three things are what most estate plans do. They either divide and conquer, or they try and unify but often force it, or they have not enough instruction of the trustee. Even if the trustee wants to, they often can't do the robust things that they otherwise could have done. We're finding the biggest change then in estate plans is to put some more of this language in the document again that describes the purpose. Not in a side letter because that's not legally binding but in the letter itself, in the document itself because that's what they read when push comes to shove.

The other thing we're seeing is that part of the estate plan is now endowing the family meeting process. It just so happens that families that have succeed have family meetings. There's no ifs, ands, or buts about it. If you succeed multi-generationally, you have family meetings. I mean, we haven't found families that succeeded multi-generationally in preserving wealth and unity of family without having some intentional family activities and meetings that they're...and those families that are succeeding have somehow endowed that. Well, why isn't that part of the typical estate plan today? And so that's one of the things that we had created. An attorney friend of mine and I created a trust designed to endow the family meeting process. Turns out it's really important to do that, and it needs to be a separate trust.

So, I hope you're seeing that the traditional estate plan might have been very tax-focused, as you've seen as well, and it didn't really get into the values and it often did things to protect the money that were damaging to the family itself, encouraging more separation, trying to force integration when nobody had any experience doing it, or not giving proper instruction. So, all of that to say a different estate plan nowadays looked very different than the ones that most attorneys are pumping out to this day. I mean, a quality estate plan that's really designed to be multi-generational actually looks quite different than a phenomenal tax planning document that are still being pumped out by some of the best attorneys in the country.

Gerald: Tom, that's such a salient point because one of the things that we do at Boston Private when meeting with folks is, you know, to try and understand their why, that is part of what we represent in the marketplace. But the why is really there to help us help them figure out how to execute on the what, and the what is documenting everything you've just covered, right? Making sure that you are setting expectations of why you want this wealth, what you want it to accomplish, how you want the family to think about it, how you want them to interact with each other. And we have so many planning discovery meetings with our clients and prospects. We say write all this down because when we meet with your estate planning council about drafting your documents, we want to have a section on intent. We want to have a section that explains to the future generations why these trusts have been set up, what your goals and objectives were.

Now, everything is iterative, everything evolves over time. But the intent of the people that have generated this wealth or have it and are looking to pass it down to the next generation, that's going to color family dynamics, that's going to color family communication for years and years to come. And it's such an important point, which is why this is a podcast so no one will see it but I just had a big smile on my face when you were talking about how estate plans have evolved over time and how that intent and meaning behind what's there has really gone away. And another reason that we so love partnering with you is because you view this substantially similarly to how we do as a value proposition for wealthy families.

A critical success factor that is often overlooked (Timecode: 01:00:19)

So, as we come towards the end of our podcast today, family legacy planning has a lot of factors to it, right? Creating, protecting, passing down. What would you say is the most challenging component of that to communicate across generations? Is it the protecting? Is it the intergenerational, sort of, family legacy planning? What would you say one generation to the next becomes the biggest sticking point in these conversations?

Tom: The communication, the parents don't know how to communicate all of this, and so they often don't talk about it. And they think that that's not communicating, not talking about it is communicating volumes, it's just bad communication. And the reason I say that is Lee Hausner, who was a psychologist in the Los Angeles area, in Beverly Hills area, actually, years ago, and she ended up writing a book about this very topic about the wealth and the effect it was having on children in the Beverly Hills area. And she did a study where she asked parents in a family, how important is your money to you? And they said it was very important, but it was almost never at the top of the importance list. Usually, the top of the list was things like health, and spouse, and family, and faith, and community, and employees, and a lot of things are up there. But money was almost never the top of that list.

But in the same study, she asked the children in those families, how important is your parents' money to your parents? And over 50% of the time, the children's said it was number one, top of the list for the parents. And so she asked the children, "Why did you say that? Did your parents tell you that?" They said no. And then, "Why do you say that then?" "Because we're going by observation. When mom and dad said it's important they be there, what were they talking about? The money, or the plan, the taxes." And the children got a sense of money was more important to the parents than the parents actually believed. So, this communication around this is either if it's attempted, it's often not attempted correctly. If it's not attempted, they're still speaking volumes but not healthy stuff. And they just don't know how to get started. And so I think, to me, the biggest bugaboo is just how do we get started?

Gerald: It's such an interesting thing because it all comes down to communication at the end of the day. Communication of values, communications of expectations, but communication and starting somewhere with something substantive. And that's not as easy as some of us who do this for a living every day and may think, right? Such an interesting dynamic and it really comes down to...again, it has nothing to do with the wealth. It has nothing to do with the current tax implications, etc. And it has to come down to human beings who are related to each other oftentimes having a conversation and understanding how to start that conversation and carry it forward in a constructive and healthy way. It's a really compelling thing to think about because I think we often overcomplicate wealth, right? And it is a complicated subject when it comes to tax, when it comes to legacy planning, charitable endeavors, etc. But you really started a very simple human element of communication. It's really interesting.

Tom: But you're right.

Gerald: Yeah. I mean, you've done a great job of outlining this for us today, and I appreciate that, Tom. But I want to thank everyone for listening in. And I hope that you found this perspective helpful. I want to encourage all of our clients to reach out to your Boston Private wealth advisor to discuss your needs or any of the elements of today's conversation. Providing guidance and support as your trusted advisor is our primary mission. By visiting bostonprivate.com, you can find more information on the important topic we discussed today. And while you're there, you're welcome to subscribe to our newsletters if you want all of this information delivered right to your inbox. You can follow Boston Private on Facebook, LinkedIn and Twitter for our timely thought leadership. And be sure to please subscribe to the "Boston Private Perspectives" podcast wherever you prefer to listen. I want to thank you, Tom, for joining us today. And I want to thank all of our clients for taking the time to listen to this podcast.

Tom: Right. And thank you, Gerald. I appreciate the time as well. And I encourage people...This was, I think, the beginning of a series we're gonna run. This was really more setting up the problem of families and family wealth. I know we're gonna go into what the solutions are on the next one, and then what they can actually do about it. So, I encourage people to...It's not one and done, please participate in the next ones.

Gerald: That is absolutely right, Tom. And we're so excited to be kicking off this series with you. And to continue on and do much more of this with you. So, thank you, everybody.

Gerald E. Baker

Gerald Baker is the head of Trust & Fiduciary Services and co-head of the Center for Wealth Planning Excellence at SVB Private.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of SVB Private or other members of Silicon Valley Bank and SVB Financial Group. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein