In Profile

A Conversation With Steve White

Complex Families

by P.E. Kelley

Mr. Kelley is managing editor of Advisor Magazine. Connect with him by e-mail:

Feuds among heirs over inheritances seem par for the course when a celebrity dies, but a new report released in April by BMO Wealth Management makes it clear that such scenarios aren’t limited to Hollywood.

The report, Estate Planning for Complex Family Dynamics, revealed some surprising findings. In short, many people go to the grave without telling their family members not only where their wills can be located, but how their estates will be divided, and why. Enter conflict.

Stephen White is a Regional Leader of Wealth Planning with BMO Private Bank, in Milwaukee, overseeing the strategic development and delivery of customized wealth planning services to clients throughout the United States. He sat down with us to discuss the genesis and scope of the Complex Family Dynamics report, and the surprising results that emerged. The report revealed that a host of issues can delay, sidetrack and even prevent a plan from being put into place. It uncovers issues of fairness, addresses a wholly new and convoluted family tree, and identifies a number of erroneous presumptions and misconceptions about the passing of estates.

What advisors should know is this: unpreparedness is indiscriminate, regardless of wealth. And clear and open communication is a vital planning tool.

PEK: It would seem that careful and deliberate estate planning, with explicit instructions for where to direct assets, would be a planning no-brainer. Your study seems to suggest otherwise.
SW: It’s really why we undertook the survey, to better understand the landscape that’s there. Who’s done their planning? How many have not? How do people view this as a priority in their lives?

We found some surprising results and I think you highlighted one of them: it should be a no-brainer, but for a variety of reasons it is not something that people always address. And there are plenty of people that have an estate plan in place, but haven’t updated it for years. And then, the plan that they do have may actually not be appropriate for their current circumstances. We have many clients that went through the process of putting a will in place when their first child was born and they haven’t looked at it in 20 years.

PEK: What are the trigger-points? When do people begin to sit down and map out their estates and wills?
SW: What is important for older clients whose children are now in adulthood, is really assessing their current situations. What are their current capabilities? The plan may have made sense when the children were young, but what has changed since then? We are seeing more and more adult children that are actually struggling somewhat financially and perhaps don’t have the acumen to manage a substantial inheritance that they might receive.

There are new and complex family dynamics that we deal with everyday: really getting deep with our clients and understanding their current family situation. This is why parents, our clients, must reassess their estate plans. Are their children going to be capable of managing their inheritance? Are their certain children that have different financial needs than their siblings?

So, we asked: what would be a triggering event that would cause a person to revisit their estate planning? It is not uncommon for many clients, even older clients, to have entered into a second marriage and have a blended family. This may alter an already complex family dynamic in terms of how their estate plans should be structured. We’re seeing situations where some children have grandchildren and others do not. Parents now have to readdress how they want to divide their estate.

PEK: How do family members perceive ‘fairness’ in the distribution of assets?
SW: What is fair is going to be unique to each of our clients’ individual situation and circumstance, and their personal values and beliefs. Here again, if a parent has a child that is extremely well-off and a child that may be struggling financially, or perhaps has chosen a less lucrative type of profession, it is not uncommon that we’ve seen them favor one child or another in terms of the amount of an inherence. So, to avoid misunderstandings, hurt feelings, it can be important for a parent to communicate to the child, who may be receiving less, what their rationale is. It doesn’t always mean there was less love, but rather a recognition that one of their children may need more financial assistance than another.

What came up consistently is a much more critical need for communication; to try and make sure it’s not a surprise to a child can be a key component preserving harmony and not having tension between siblings.

PEK: It appears that you’ve uncovered some misconceptions about inheritances. Do people make assumptions about their ‘role as an heir’?
SW: It differs with each family dynamic, and that is why it’s so important for the client as well as the advisor to truly understand that family dynamic. So yes, it is not uncommon for children, when there has not been communication, to simply assume that everyone will receive an equal share. But when that is not the case, when inheritances are distributed unequally, children often mistakenly equate that with how their parents loved them, which may not agree at all with what the parent actually intended. The resulting anguish and strife can last for generations. Family harmony suffers.

Divide things not families. And it’s not always the expensive things that cause the conflicts. Quite often it’s just the opposite

PEK: So, what is the prelimnary conversation that advisors should have with their clients? How do you open this discussion?
SW: We must develop deep personal relationships with our clients and truly understand what their unique family situations are, what their need are. What are the emotional pressure points that parents may face, and what are the options available to them? For example, we can educate a parent that an inheritance may not need to be left outright to a child who may not be able to properly manage it. Perhaps a trust would be a better solution to provide a parent with a way to protect that child when they’re no longer available to be the safe harbor. The end game, really, is to set up a legacy that is consistent with their wishes.

PEK: What jumps out from the report is that many people go to the trouble of creating a will, a good estate plan, and then file it away in a drawer.
SW: Very true. Planning is not a singular event, it’s an ongoing process. It’s important that our clients periodically review their plan to make sure that it’s still appropriate for their circumstances, while taking into consideration any significant life events that may have occurred. And yes, it certainly doesn’t help the family if no one can find the documents after they’re needed. It is important that the people who have been designated as trustees, as executors, are aware of what the plan entails and what their duties are going to be and that they’re willing to take on the responsibility.

PEK: Did you find any reluctance on the part of clients to face the finality of it all, and does that impede the advisor’s ability to begin the conversation?
SW: Quite often, the reason that planning has not been done is that there are difficult issues that the client simply is not ready to confront. A common example is with married couples having different views on who should be named as the guardian for their children. Quite often, they don’t have a full understanding that the guardian does not necessarily need to be the same person that would act as the trustee. So, we can help people move forward with the process by simply clarifying the various duties and responsibilities of guardian versus trustee. Once they realize that they they can name different people to fulfill different roles, it diffuses the conflict and allows them to move forward.

Another example is when there is a child who may be struggling, in some way or another, and the parent may not know how to best structure things for that child, knowing that they may need to treat that child differently than their other children. Here, we can educate the clients to the benefits of actually putting safe guards in place for that child. This can help advance the parents toward completing the planning.

PEK: It’s not always about the money, is it?
SW: That’s true. There is a quote from the report: Divide things not families. And it’s not always the expensive things that cause the conflicts. Quite often it’s just the opposite: the most sentimental item, with very little monetary value, can spark an outrage. Who will get mom’s wedding ring? These are things that need to be explained, and explained clearly.

Most of our clients put a much higher value on preserving family harmony and on making sure that their children are protected than the amount of worldly possessions that they’re going to pass on to them someday. It’s all about making sure that what is passed on doesn’t cause family strife, rather than leaving your children in the dark and forcing them to speculate on what the reasons may have been.

PEK: The report made some interesting distinction between marital status and how it plays into the construction of a will: married, divorced, second marriage, same-sex marriage, etc. What did you learn?
SW: We found that the traditional family of first married couple, children that are all form the same marriage, is simply no longer the norm. We need to be aware that every family may have different family dynamics. That the traditional married family with children all from the same marriage is not always what we are going to encounter. So we need to be sensitive to some of the unique complexities that may be in place with blended families. Also, with older clients that may be widowed, many are remarrying late in life and bringing two families together. They now have to plan for these new and complex situations.

PEK: Did anything in the report really surprise you?
SW: There are a lot of people out there that have not done any planning. This didn’t really surprise us, but it is still unfortunate. And it is indiscriminate. People from all walks of life, and all ranges of wealth, for whatever reason have not addressed their estate planning. And the old adage rings true: it’s better to have some plan in place than no plan in place. ◊