Identifying and Monitoring Risks

While it’s human nature to avoid uncomfortable discussions, it’s important to openly discuss the risks a successful family may face. Most family dynamics are different, which is why it’s important to customize the approach to your family. It’s critical to get a head start in managing the risk of potential acrimony among inheritors early, rather than waiting until after the current generation is gone.

Setting priorities

You can collaborate to identify and monitor risks to your family’s legacy and determine a proper risk management approach, based on your family’s priorities: growing wealth, preserving wealth, engaging in philanthropy, or a combination of factors. Ideally, the family decision-making process starts with decisions of lower consequence and works its way up over time.

Sustaining spending

Examining the risks of your heirs increasing their spending in anticipation of an inheritance and after receiving one is an important practice. Your family should consider the sustainability of spending in different economic environments, as well as the desire to leave assets for future generations. “Sudden money” is not just a problem for lottery winners; unprepared heirs face the same challenges and outcomes.

Managing discord

Risks can also emerge if inheritors don’t feel they are being treated fairly. Families need to be on guard for any potential disconnects between anticipated inheritance and reality, as well as possible discord among multiple inheritors receiving unequal shares. With the help of an advisor, you may want to discuss how and why you have determined inheritance allotments.