Navigating Generational Divides

To better serve multiple generations, estate planning needs to expand beyond financial considerations.

The age span of families living and managing wealth together has been rising for many decades. To understand this trend, consider that today, Americans’ life expectancy has risen by over 30 years since 1900. Also consider that the number of adults who have remarried has increased threefold since 1960¹ and that a 10-year age gap exists in 20% of new remarriages.²

The expansion of households and families across multiple generations raises a host of issues and opportunities for estate plans. One primary example is the need to bridge the generational divide that exists between grantors and beneficiaries. While younger generations seem increasingly inclined to seek meaning and purpose behind their inheritances, traditional estate plans rarely provide such insight. To deliver it, older generations should approach estate planning more holistically, with a focus on communicating the basis for their intentions both before and after they die.

Methods for Navigating Generational Divides in Estate Plans

• Consider adding a statement of wealth transfer intent (SOWTI) to your estate planning documents. As a personalized declaration of your wealth transfer goals, a SOWTI is the heart of your trust or will. It provides a unique intention that is tied to your personal history, values or perspectives and thus overcomes the traditional reliance by trustees and beneficiaries on making inferences about the overarching purpose of your wealth. This clarity has become increasingly relevant in an environment where tax minimization goals have become less critical for many individuals under current law.⁶
  
  Sample goals that might be found in SOWTIs include encouraging entrepreneurialism, promoting philanthropy, or preserving family values and traditions. While many would agree these types of higher level objectives communicate an invaluable part of one’s legacy, they have rarely been included in traditional estate plans.
  
  For more information about SOWTIs, see The "Goal Standard" of Estate Planning
• Select trust distribution standards thoughtfully. Trust provisions that provide trustees guidance regarding what types of distributions can be made have historically been relatively narrow in scope for tax reasons. Support, maintenance and health are among the most common standards, whereas broader purposes, such as comfort and best interests, are used less frequently.
  
  The narrowness of these standards is becoming increasingly incongruent with longer trust terms and generational shifts in philosophies and priorities. For example, carefully consider whether you want distributions to your children and grandchildren to enable more aspirational goals, such as global travel, professional education or social impact. Or more broadly, consider giving your trustees greater distribution flexibility so that they can adapt and respond to the changing needs of your beneficiaries.

• Focus on multiple aspects of wealth. Historically, estate planning has been predominantly focused on the financial aspect of legacies. But when families think more holistically about their wealth, their plans for their financial wealth will be more closely aligned with their values and aspirations.

Charles W. Collier offers a framework for this type of approach in his book Wealth in Families, where he expands the definition of wealth to include four quadrants: financial, human, intellectual and social capital. Consider adopting a similar approach with your family to move the conversation from “how much and when” to answering some of the most fundamental questions about your goals and values.

Generational shifts in attitudes, preferences and behaviors are reshaping many aspects of life in the United States. The estate planning process should be no exception. Work with your family and advisors to adopt a model that can bridge differences and communicate your wealth’s purpose for many generations to come.