How to Pass Family Wealth With Minimal Friction

Parents often look to provide for their children by passing on the wealth and assets they accumulated. Unless carefully planned, the division of wealth can be a common cause of family conflict.

 

Wealth Transfer Decisions
There are a number of factors that can impact the ease and efficiency of transferring wealth to the next generation.

Division of assets. Determining how much to distribute to loved ones can have tax and relationship implications. Should everything be split evenly? If not, what factors can be used to determine which assets are given to whom?

Channel. The way in which an inheritance passes to the recipient (e.g., as a gift, through a trust, or both) may come with tax and estate planning considerations.

Timing. Whether distributions begin during the benefactor’s lifetime or start after they pass could impact the tax treatment of the transfer. Additionally, gifting during a parent’s lifetime can allow the children to benefit from inheritances earlier in life.

While every situation is different, crucial considerations, best practices, and frequent communication can help families minimize tension and create a distribution plan that meets the benefactor’s goals.

 

Dividing Assets Among the Next Generation
Dividing assets “equally” among children might seem the clear-cut and fairest route to wealth distribution. But some assets don’t allow for equal distribution, and benefactors may need to make decisions that optimize intangible outcomes among beneficiaries. Being transparent about reasoning can help to mitigate conflicts.

For example, a family might bequeath a boat to one child with a passion for sailing and an education fund to another with a growing family. Other factors to consider and discuss for asset distribution include:

• One child might have been a caregiver to their parent(s).
• Additional provisions may be earmarked for a child with exceptional needs.
• One child might have access to other sources of wealth, while the other(s) have needed substantial support over the years.
• One beneficiary might have a particular passion for a cherished asset (e.g., a specific piece in an art collection).
• Assets like vacation homes or family businesses may need additional funding and/or resources to maintain.

 

Communicate Early and Often
Dividing estates and distributing wealth can be filled with complexities, and frequent communication is key for a successful transfer. Starting discussions early, well before the transfer begins, ensures everyone has time to plan successfully and address changing situations.

Families may elect to discuss this and related topics during regularly hosted family meetings, or may decide to set up a specific conversation. It can also make sense to include thoughts and motivations around wealth transfer decisions in a legacy letter for loved ones.

Contact your Goldman Sachs advisor to review and discuss key steps for a seamless transfer.