Two brothers were squabbling over their deceased father's $8 million estate. One wanted a greater entitlement because he mowed his father's lawn each week. The other insisted that he bought the petrol to run the mower, which evened the score. The cost of fuel? $1,000. The bill for legal and advisory fees? $375,000.
With the holiday season fast approaching, it’s the perfect opportunity to gather your loved ones and have an honest conversation about your estate planning. Perhaps while carving the turkey, or maybe around an Aussie BBQ, take the time to discuss your legacy as family harmony is the greatest gift of all.
As a Business Services Partner at BDO Sydney, I've seen many family feuds over money. The main cause? People give too much attention to the accounting and legal elements of wills and estate planning at the expense of considering family dynamics.
Why is estate planning such a difficult conversation to have?
Inheritance and estate planning have always been sensitive issues. Sibling rivalry, acrimony among in-laws, breakdowns in blended families... they can all cause feuds over inheritance. Additionally, any asset with some level of emotional attachment will trigger heightened feelings.
There are a surprising number of very wealthy Australians who do not have detailed estate plans in place. This is because conversations about estate planning are just too confronting. People often feel uncomfortable with speaking frankly about money, not to mention the idea of mortality, while many want to steer clear of any discussion that could stir up resentments.
However, difficult conversations and thorough estate planning now will spare expense and heartache later.
How to discuss estate planning?
It's important to discuss estate planning as soon as possible - it doesn't matter how old you are, the earlier you have this conversation, the better. Call a family meeting (which can be formal or informal depending on what's required) and get the conversation started. You don't have to jump into who gets what straight away. Start slow by talking about the legacy you want to leave (this could be having a successful family business or leaving a philanthropic legacy depending on the person) and what you want to provide for future generations. You can get into the nitty gritty of who gets what later.
As families grow, you may find a kitchen table conversation isn't enough. It helps to seek the assistance of independent advisers, or even set up a family board or council to provide clarity around roles and responsibilities, as well as manage expectations.
But throughout all this, it's essential to keep the people who will be affected most - the family - in front of mind.
Remember to bring all the beneficiaries along on the journey, including those who you may be excluding. This will help to avoid resentment further down the line when a will is read and the family members don't understand the reasons behind the division of wealth. If in-laws or extended family are involved, consider splitting the discussion into two - the first with the direct descendants, and the second with the wider group.
So this Christmas, give your family the gift of harmony. Be honest, be transparent, and show your reasoning. Have the conversation early, and have it with everybody. You don't want your main legacy to be a family feud.
If you have any questions about this topic, please feel free to contact your local BDO adviser.