According to Stanford Brown private wealth adviser Kirsten Lynn, demographic trends have significantly changed intergenerational wealth.
“Tax effectiveness and asset protection are important, but so too are legacy and the preservation of family bonds,” the wealth adviser said.
Ms Lynn has pointed to six planning mistakes blended families need to avoid when they undertake this important process.
The six most common mistakes blended families make when estate planning are:
Expecting a single solution
With two parents and their children coming from previous marriages, having everyone on the same page can be difficult, Ms Lynn warned.
“There is no single solution. Blended families and their advisers will generally settle on a strategy in line with the competing responsibilities and goals, and the emotional and financial trade-offs,” Ms Lynn explained.
Not asking the beneficiaries’ expectations
It is not uncommon for couples to realise there is a divergence of views on wealth transfer, according to Ms Lynn.
“Without asking your family about their hopes and expectations and without considering the interest of beneficiaries, there is a greater risk they won’t achieve [their] estate planning goals,” the wealth manager said.
Focusing only on what happens after death
With an ageing population, Ms Lynn has explained how intergenerational wealth can help families when they need it the most.
“If your parents are living into their 90s, that means you’re probably not inheriting until you’re in your 60s,” Ms Lynn said.
This is why planning can help a child through helping pay for their home or put the grandchildren through school.
“How you transfer control of your financial decisions during your lifetime can impact the gifts intended after death,” Ms Lynn said.
She also emphasised the need for careful consideration when planning how you delegate power of your estate as outlined in the will.
Intermingling family finances
Couples who have previously been married have accumulated wealth separately and might have plans for their individual wealth, the wealth manager said.
“It’s worth getting advice about how your decisions now affect your plans later on. It is important to take the time to plan before you sell your home or help your partner renovate their house, or before you buy a home as joint tenants,” she said.
Tying your beneficiaries together financially
The wealth manager suggested products and services such as life estates and capital reserve trusts can tie beneficiaries together after death, although they may produce family conflict.
“Consider how and when your children may inherit, and under what circumstances, particularly if your partner is likely to outlive you by some time,” Ms Lynn said.
Assuming your family will never be blended
In many first marriages, partners agree that they want wealth to eventually pass to the children on the death of the last survivor.
“However, estate planning is ultimately about planning for protecting your loved ones if anything happens to you.”
She said that in some first marriages, couples are now actually choosing to acknowledge and plan for the prospect of later remarriage if one of them passes away.
"They want to protect the wealth they have built together for the children," Ms Lynn concluded.
nestegg previously discussed the benefits of holistic planning for intergenerational wealth here.
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