By Mofoluke Keshinro TEP
When individuals amass significant wealth throughout their lives, they often want to ensure that the hard work and dedication they invested in building their wealth will benefit their chosen beneficiaries. However, it’s not uncommon for some wealthy individuals to delay or neglect the crucial process of transferring their wealth to their loved ones. This oversight can lead to family disputes, misunderstandings, and even the unfortunate loss of a family legacy. To prevent such issues, it is imperative for affluent individuals to establish a seamless structure for wealth transfer.
A patriarch or matriarch with substantial wealth carries the responsibility of understanding the dynamics within their family. This understanding is crucial for safeguarding their wealth and fostering family harmony. Creating an estate plan sends a powerful message to the family: it demonstrates care and concern for their well-being. An estate plan not only ensures the equitable distribution of assets but also leaves behind a legacy of fairness and love.
The primary objective when creating an estate plan should be to promote unity and harmony within the family to achieve common goals. Every action taken in the estate planning process should aim to avoid disagreements, conflicts, or dissatisfaction among family members. Here are some effective strategies to minimize inheritance conflicts:
Set Up a Robust Estate Plan
A robust estate plan is the cornerstone of a seamless wealth transfer. This plan can include tools like a Will or a Living Trust. A Will becomes effective after your passing, while a Living Trust operates during your lifetime and allows for adjustments to meet your evolving objectives. It’s essential to update your estate plan whenever significant changes occur in your life, such as the sale of assets, to ensure that beneficiaries are not inadvertently disinherited.
Transfer Assets to Your Trust
Assets not registered in the name of the Trust do not fall under its jurisdiction. Therefore, it’s crucial to re-title and transfer assets into the Trust’s name. Adequate funding of your Trust account enables the Trustee to carry out your directives as outlined in the Trust Deed.
Choose an Institutional Executor and/or Trustee
To ensure fairness, objectivity, professionalism, and accountability, consider appointing an institutional Executor or Trustee to execute the instructions outlined in your Will or Trust Deed. Institutional Executors and Trustees follow your directives precisely, eliminating potential bias or sentiment-based decisions.
Leave a Letter of Wishes
While a Letter of Wishes is non-binding, it serves as a guiding document for the Executor and Trustees. This letter explains the intentions and reasons behind your Will or Trust instructions. Including funeral directives in this document is advisable, as it is typically read before the Will itself (if a Will is part of your estate plan). This clarity can prevent conflicts and miscommunications among family members.
Be Fair in the Distribution of Assets
Avoid favoritism during the distribution of assets. Fairness should be the guiding principle to prevent sibling rivalry and conflicts. Equitable distribution should be the goal, avoiding situations where one beneficiary gains an unfair advantage over others. If certain family members have special needs requiring additional financial support, create a separate arrangement clearly stating the reasons for the extra provision.
Plan for Business Succession
Transferring ownership of a family business demands careful consideration. Some family members may be actively involved in the business, while others may wish to join. Effective grooming and open communication about the choice of a successor are essential to ensure cooperation among family members and a smooth transition. Consider involving non-active family members by inviting them to sit on the company’s board to provide input on business strategies.
Make Provision for One-Off Gifts
Include arrangements for one-off gifts to individuals who have been close to you, such as your personal assistant, driver, or cook. Additionally, consider one-off gifts to religious institutions or charitable organizations that hold significance in your life.
In conclusion, a well-crafted estate plan, guided by an expert, is instrumental in preventing family disputes over inheritance. Your estate plan will ultimately determine whether your wealth survives to benefit the next generation. Minimizing conflicts in inheritance distribution should be a top priority when establishing your estate plan. At ARM Trustees Limited, we are here to assist you in creating an efficient plan that aligns with your objectives and fosters family harmony.