- Lack of documentation, poor planning and failure to prepare the next generation for their inheritance can easily derail a family’s estate plans.
- Get wills, trusts, powers of attorney and other legacy planning issues in writing to minimize disputes about where (and to whom) your assets will go.
- If you decide to give a lot of money to your children and grandchildren, make sure they understand your family values so they won’t use their newfound wealth irresponsibly.
Ed Coyle, the founder of our firm who passed away recently, liked to say that legendary Chicago mayor Richard J. Daley failed the city by never leaving a successor. Ed liked to share that story when he was helping clients with estate planning, and today I want to cover five common pitfalls of family legacy planning.
5 common estate planning pitfalls
- Lack of a plan. If you don’t have an estate plan, then your state of residence will have a plan for you. Whether in Illinois, or in many other states, you probably won’t like the government’s idea of what’s best for your estate. Make sure your will, trusts and powers of attorney are in writing to ensure that your estate goes where you want it to go after you pass away.
- Poor structure. All too often a person’s trusts are poorly arranged, ownership of assets is not assigned correctly and beneficiary designations are improperly papered. Take the time to review what you have set up or ask a professional to review this with you.
- Unaddressed special needs. I work with families who have special needs, both mental and physical. This can include drug or alcohol addictions. Make sure each family member has the financial support necessary to address their needs, but not so much that inheritance ruins their lives.
Points 4 and 5 are more about pitfalls that impact the essence and the meaning, value and purposes of your estate.
- Lack of next-generation leadership.
- Unidentified family values.
This may help to understand the importance of addressing these two. A few years ago, Ed Coyle’s oldest daughter, Colleen, put together a book about the Coyle family life and legacy. The Coyles are a large clan whom I’ve come to know well. They really understand what their family is all about. For them, the money is just a vehicle for helping to achieve those values.
What I learned from my dad’s passing
When my dad passed away earlier this year, I wanted to spend more time learning about him to understand what really made him tick. Even after all these years, I wanted to get to know him and my mother and my grandparents more deeply because I wanted to understand where I came from, what made me the way I am and what I can pass on to my children.
You may decide to give a lot of money to your children and grandchildren. They’ll do what they want with it. If they understand your family values and are ready for the responsibility of their inheritance, then they can do a lot of good with your money. But without that context, the money can be used irresponsibly and not in a way that you had intended.
Good leadership can make a huge difference. That’s where trustees and executors come into play— people who really understand the family’s values and desires about what will happen next with their wealth.
Good advisors do more than simply help clients with investment management, diversification and tax planning. They understand a client family’s values and the relationship of those values to their money.
Until next time, enjoy.
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