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June 28, 2021

The Secret to Divvying Up Assets? Communication

Post By:
In-House Contributor
Guest Contributor:
Anne Bucciarelli, Director of Wealth Strategies & Heather George, Co-Head of Family Engagement
Alliance Bernstein
Submitted by Christine Vergari, Vice President | Bernstein Private Wealth Management

How do you split up a pie? If everyone wants dessert, it may make sense to cut even slices, but some may want larger or smaller pieces depending on their appetite. Now imagine it’s not a pie; it’s your family’s wealth. Everyone has different needs—or has made various contributions to the family’s success along the way. How you plan to divide assets among family members can have consequences in the future—some of them unintended.

Many families struggle with defining what’s fair, particularly when individual members have different needs and desires. Most families tend to default to splitting assets equally. But this may not be the best approach. Addressing legacy goals beyond the usual “equal shares” often means looking beyond dollars and cents. At the end of the day, most parents want to avoid splitting siblings apart when they divvy up assets.

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Harmony, Not Division

One of the most significant considerations when distributing wealth is fostering harmony and avoiding divisions among future generations. Parents often “discuss” their children’s inheritance by merely reciting a litany of what’s in their estate plans. But inheritance warrants a more in-depth conversation—a real exchange about everyone’s hopes and needs so that family members can come together and learn from one another.

While the discussion may focus on the planning and transfer of funds, it should also include values. What’s most important to each member of the family? Understanding other points of view will yield a much better appreciation of the family’s collective interests and needs.

Family Dynamics

Many issues emerge in family discussions that center on the roles that siblings have played. For example, older children accustomed to being in charge of younger siblings may find it challenging to share authority as adults. Similarly, “baby” brothers and sisters may struggle to have their voices heard in family discussions. Historical roles and perceived inequalities growing up—the most favored child or the one that “got away” with everything—can lead to resentments that surface when discussing fairness around estate planning issues.

A sense of unfairness may also arise when aging parents turn to adult children for support at home or with business operations. A child who is closer geographically, or perceived as more emotionally available, may be called upon to provide care in ways that other siblings are not. To avoid fracturing sibling relationships, parents should consider their children’s interests and abilities when deciding how to distribute wealth. It is well worth the time and energy to discuss these issues at family meetings—to clarify parents’ wishes and the interests/needs of children—so that decisions about fairness are based on shared understanding.

An Evolving Process

As roles and contributions shift over time, or situations and priorities change, financial planning, —including inheritance—should account for these fluctuations. An ongoing dialog may be best, especially if conflicts arise. Frequent and open communication can prevent misconceptions, suspicions, and resentment from taking root.

Yet in reality, conflict will always exist to varying degrees. Family members need to accept this, rather than withdraw from each other or “bury” the disagreement. While on the surface, arguments may seem to focus on getting a fair share, old resentments often bubble up underneath. Talk honestly about disagreements, ask questions, and listen for each person’s take on the underlying facts and feelings.

Sharing in this way isn’t always easy. It’s often complicated. But the rewards can be life changing. When discussions occur and decisions are made, it’s important to document them. These notes will serve as guideposts for future conversations and can be a positive indicator of healthier, more supportive relationships.

Avoid Unintended Consequences

Parents understandably wish to approach estate planning and the division of assets in a way that avoids unintended consequences, such as strained relationships. Because at the end of the day, a strong family unit may be your most enduring achievement. Following these steps can help provide direction (Display).

This blog is a synopsis of the white paper, “When All Things Aren’t Equal: How to Divide Assets Without Dividing Your Family,” that Bernstein co-authored with Bob Waldinger and Marc Schulz from the Lifespan Research Foundation, in collaboration with the Harvard Study of Adult Development.

The views expressed herein do not constitute, and should not be considered to be, legal or tax advice. The tax rules are complicated, and their impact on a particular individual may differ depending on the individual’s specific circumstances. Please consult with your legal or tax advisor regarding your specific situation.

By Anne Bucciarelli, Director of Wealth Strategies, Alliance Bernstein

and Heather George, Co-Head of Family Engagement, Alliance Bernstein