How to Pass Family Wealth With Minimal Friction

One of the most significant gifts parents can give their children is the wealth and assets they accumulated throughout their lives. Yet divvying up that wealth is also a common cause of family conflict, and can drive irreparable wedges between children, parents, and relatives.

Make Decisions About Distribution and Timing
The ideal outcome is that heirs will benefit from a meaningful inheritance, preserving family wealth and legacy for generations. Unfortunately, managing large estates can be complex, and numerous factors can complicate and even prevent the collective end goal.

One such factor involves fundamental decisions around the distribution, such as whether to pass an inheritance through a gift, a trust, or both. Timing is another issue. Distributions to beneficiaries often happen after the first generation passes, but as life expectancy continues to increase, parents may want their children to benefit from inheritances earlier in life. Then there are issues of how much to distribute to each heir: Should the split be even, and is that “even” possible, given the asset type?

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 while minimizing drama.

Equal Doesn’t Always Mean Fair
Splitting assets equally among children might seem the clear-cut route to wealth distribution. An estate divided equally can prevent conflict over perceived and real fairness and favoritism. But some assets don’t allow for equal distribution, and benefactors may need to make targeted decisions that optimize intangible outcomes among beneficiaries.

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

• One heir might have been a caregiver to their parent(s).
• Additional provisions may be earmarked for a child with exceptional needs.
• One child might be a big wage-earner, while the other(s) needed substantial support over the years.
• One beneficiary might have a particular passion for a cherished asset (e.g., an art collection).
• Assets like vacation homes or hotels may need additional funding and resources to operate.

It Comes Down to Communicating Early and Often
Dividing estates and distributing wealth are complex, and frequent communication is key for successfully transferring wealth. Starting those discussions early, well before the death of a family member, ensures everyone has time to plan successfully and address changing situations.

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