Another critical piece of the estate planning process for affluent families is preparing the next generation for the wealth they’ll be inheriting, Kanji says. For example, some clients give their beneficiaries limited funds in their early adult years to start learning the fundamentals in budgeting, investing and working with professional advisors.
When families are passing down a family business to the incoming generation, education, mentorship and gradual involvement in business decisions can prepare them for their new responsibilities, he says.
“That doesn’t mean everyone has to get an MBA or work in the family business, but they should have some financial fluency around making decisions in business, and good financial information to review to make sure the business is managed appropriately,” he says.
Kanji recalls meeting with a couple who have a large, family-owned enterprise. They had decided their two adult children, who had built careers outside of the family business, would inherit the business as part of their estate plan. The enterprise would be run by professional management and the children would assume an ownership role.
As part of the bespoke estate planning process with his client, Kanji met with their children to help them learn about the responsibilities they would be assuming as owners, the activities they would need to be involved in and how they could evaluate and oversee the business.
To ensure the children felt confident, Kanji set up educational seminars where his client, the company’s founder, shared his knowledge of the business, the company’s key operations and the skills that would be necessary for future leaders. The client’s trusted advisors also explained the financial structures and assets that the family held outside of the family business.
“The clients disclosed a lot of information to prepare the upcoming generation, should they need to step in,” says Kanji.
This kind of formalized, structured preparation can be an excellent way to take emotion and uncertainty out of the estate planning process, he adds.