Although traditional wealth planning is effective in creating vehicles to pass wealth from one generation to the next, it falls short of helping families manage successful cross-generational wealth transfer and ease the strain that shared resources can put on relationships.
Over time, uncoordinated — or misunderstood — actions by individual family members, whether intentional or not, can erode the very fabric that binds a family together. Successful multigenerational families, however, construct technically sound estate plans while nurturing strong communication and joint decision-making skills critical to maintaining family harmony. The following communication tools may be written for different recipients, but they all center on values and the “why” behind decisions on wealth transfer planning.
Statement of Wealth Transfer Intent
Provide context to beneficiaries around your wealth transfer plan by sharing your intent, values and plans for supporting your family’s goals, lifestyles and priorities. Consider sharing your story ahead of time, including how your wealth was created and the lessons you have learned, perhaps even describing setbacks or disappointments.
These statements are intended to complement your estate planning documents (but do not override the specific terms of your trusts) and allow you to expand on how your own values and life experiences have informed your plan. Learn how to develop your own statement of wealth transfer intent.
Letter of Wishes
Provide context and guidance to your trustee or your beneficiaries, and in combination with a Statement of Wealth Transfer Intent (SOWTI), guide decision-making on behalf of your family. Letters of wishes, like SOWTIs, can give the trustee insights into how you envision your wealth should be managed for your beneficiaries and express your hopes and desires for your family. They may include specific examples of how you expect distributions to your beneficiaries to be handled or your perspective on the trustee’s ability to address changes of circumstances, but they are not legally binding and do not change the terms of the trust.
You may execute multiple different Letters of Wishes, each intended for a different recipient (trustees and/or beneficiaries). Ideally, you would share with your beneficiaries a letter of wishes written for a trustee. Be clear in the letter of wishes to a trustee whether it can be shared with the beneficiaries if you have not shared it during your lifetime.
Cornerstone Statement
Articulate your family’s shared values, vision and goals to build on values of the past and project them onto a shared vision for future success. By identifying actionable steps to bridge their current and desired future state, families can create a common purpose for today. Unlike a SOWTI, which is focused on the purpose of the grantor, a cornerstone statement captures a family’s consensus on their core values, future goals and their commitment to working together to achieve those goals. The process of building a Cornerstone Statement is as important as the statement itself. Embracing the natural diversity families develop over generations leads to both a well-informed vision and a high functioning family. By developing a Cornerstone Statement, families can create transparency, foster trust, develop repeatable communication patterns and bolster joint decision making skills that will serve them long into their future.
Family Values Statement
Coalesce around how your family’s wealth can be used to gain consensus on issues important to your family. In the context of ESG investing, these statements can be used to identify shared values and sustainable objectives, giving every trust beneficiary a voice in how the portfolio can be leveraged to make an impact and reinforce intergenerational harmony by aligning on sustainable investment goals. At Northern Trust, we have worked to establish a process by which beneficiaries with consensus sustainable goals may be able to implement sustainable objectives in their trust portfolios.
To learn more and explore sample statements and planning tools, visit Northern Trust’s website.
Disclosures
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This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.
