For This HNW Firm, It's Crunch Time for Estate Planning

It's an interesting question. Generally, I would say, high-net-worth people respond with the same fears and emotions as more middle-income and mass affluent people. They might lose $2 million in portfolio value in a year like 2022 instead of $200,000, and they feel the sting.

While people with larger portfolios have the same concerns about losses, they do often have different goals. So, instead of being worried about their own personal retirement, they are worried about the future generations of their families — or they have a charitable plan and they don't want to see their giving power reduced.

So the goals are different, but the feelings are largely the same.

What can you tell us about the art and science of serving a highly wealthy family across generations?

One place to start is to point out that parents often want their kids to have the same outlook and beliefs as they do about work, money and life. Obviously, that doesn't always happen, and it can be a source of great stress and consternation for our clients.

For many people who have been very successful or who have themselves inherited substantial wealth, the legacy planning goal centers around a desire to really pass on a good moral compass, in addition to the wealth.

To get this right, regular family meetings are key, but at the same time, you can't force them if the time isn't right. Both the kids and parents have to be ready for what can be challenging conversations.

One interesting thing I've seen in my career is that, in many families, you have different kids with very different personalities, life goals and visions about what wealth means. Some kids may be very serious and studious about what wealth means, while others in the same family can be more lax.

Broadly speaking, clients are often concerned that their kids aren't being as diligent with money as they themselves were when they were younger. Often, the parents have given their young-adult children a really great head start in life. That can lead to great insight about wealth in the second generation, but it can also create issues.

In some more extreme cases, you might have to use trust mechanisms and really not give the control of the legacy in one fell swoop to the next generation. Sadly, everyone in this line of work has seen the cases where people spend through tremendous amounts of money really quickly after their parents die.

One unique response I've seen is when parents match what their kids are earning, for example, if there are concerns about their children not seeking gainful employment.

Of course, there are also many wonderful stories where the kids learn really well from their parents. In fact, I have some families I'm working with now where we have the third and fourth generations coming up, and that's so wonderful to see.

Would you say wealthier people are uniquely focused on tax mitigation issues?  

Yes that's often the case, but a client's unique outlook on taxes can be very nuanced and specific.

In fact, some people are very eager and willing to pay their fair share or even more than their fair share. They see paying taxes almost as a patriotic thing that complements their charitable giving, and so they don't push us to do all the possible tax loss harvesting, for example.

Across our clients, I would say that 80% probably want to save all they can on taxes, and so yes, it's a big job for us as their advisors to find ways to mitigate capital gains taxes.

(Pictured: Nicole Asher)