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Avoiding Family Feuds Over Money

Investopedia logoInvestopedia 02-09-2016 Mark Kolakowski
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A recent high net worth households (defined for this study as those having at least $3 million in financial assets) reveals differing attitudes about how families should discuss and make decisions about money. The survey indicates that open and frank communications, respecting varying opinions, are critical for avoiding conflicts.

Key Findings

Just 22% of the wealthy families surveyed reported having open discussions about money, seeking input from all members. At the other end of the spectrum, 25% avoid such discussions entirely, finding it difficult and uncomfortable to initiate them.  Meanwhile, in a majority of these rich families, decisions about money tend to be made in a largely unilateral fashion by one or more key family members, without soliciting others’ opinions beforehand. (See also: Financial Planning: It's About More Than The Money.)

Especially in families without free and open communications about money matters, the prime areas for conflict include:

  • division of assets in an estate plan or will,
  • conditions and expectations surrounding gifts of money,
  • prenuptial agreements and
  • distribution or use of funds placed in a trust.

According to Merrill Lynch, understanding and attempting to reconcile differing viewpoints within the family on the use of wealth is essential. Maintaining silence in an attempt to avoid conflict or appearing greedy, typically proves to be counterproductive.

Gifts and Estate Plans

Monetary gifts to family members are perceived as essentially a manifestation of love by 69% of Baby Boomers surveyed, and by 78% of those over age 70. Only about half of Millennials concur, however. The rest tend to suspect that the giver actually is using money to exert influence over the recipient, or is motivated primarily by tax considerations.

Attitudes diverge by generation regarding estate plans as well. Equal shares for all heirs is deemed most fair by 59% of Baby Boomers and 68% of those over age 70. Only 33% of Millennials agree. They think that shares should be adjusted to reflect each recipient’s:

  • financial need,
  • contributions of time and energy to family life,
  • age and,
  • values, behavior and ability to handle money responsibly

Of course, another potential topic of discussion and potential source of contention is whether the beneficiaries of an estate should include people or organizations other than lineal descendants of the grantor.

The Bottom Line

The least productive way to initiate discussions about family wealth, according to Merrill Lynch, is to start with questions about how much the family owns, or how it eventually is to be divided. Rather, it should begin with education about sound financial decision making, followed by the consideration of various planning options and the emergence of a consensus regarding the rationale and value judgments that will drive planning choices. While over 75% of respondents think that the primary wealth holder should begin the discussion process, this person often does not welcome free, open dialogue or collaborative decision-making.

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