For many ultra-high-net-worth individuals (UHNWIs), it's easy to believe there will always be time to address estate planning. The demands of running a business, managing investments and nurturing family relationships often take precedence. But estate planning isn't just about preparing for the inevitable; it's about ensuring your wealth survives — and thrives — for generations to come, even in the face of unexpected events.
At Whittier Trust, I've seen too many situations where a lack of proactive planning has created unnecessary stress, conflict and financial strain for families. The good news? With a thoughtful, early approach to estate planning, these crises can often be avoided. Here are some of the critical lessons I've learned from my years in estate planning and wealth management.
Why Early Action Matters
Waiting to address estate planning until it feels urgent is a common mistake. It's human nature to focus on immediate priorities, but this approach leaves families vulnerable to the unexpected. One of the most overlooked aspects of estate planning is ensuring that the right legal structures are in place to address unforeseen circumstances, including incapacity.
Imagine a scenario where a family patriarch or matriarch — the key decision-maker — suffers a sudden illness or accident that renders him or her unable to manage the family's financial affairs. Without a plan in place, this can lead to delays in critical decision-making, confusion over who has the authority to act, and even costly legal battles. Such crises can strain family relationships and jeopardize the wealth that generations worked hard to build.
The consequences of failing to plan for the unknown can be significant. In one case I handled, a family member serving as trustee began losing capacity — repeatedly requesting the same distribution within days, forgetting she had already done so and that it had already been fulfilled. It became clear that she could no longer reliably fulfill her responsibilities, but determining her incapacity and appointing a successor trustee created tension, confusion and delays — three things you never want in the financial world. Without a clear plan, these situations can lead to family conflicts and financial risks, all of which could have been avoided with proactive estate planning.
This is also where powers of attorney play a critical role. Many people assume that simply having a document in place is enough, but these agreements often lack the flexibility to optimize the estate for tax purposes. For example, most powers of attorney grant authority only to make annual exclusion gifts (currently $18,000 per recipient). However, more comprehensive provisions can allow an attorney-in-fact to gift beyond this amount, potentially reducing estate tax burdens significantly. Without this foresight, families may miss critical opportunities to minimize taxes and preserve wealth.
The Hidden Risks of Family Trustees
Another common challenge arises when families don't take the time to fully understand their options and appoint relatives as trustees. While it may seem like a natural choice to entrust a loved one with managing your estate, this can lead to unforeseen complications. Family members serving as trustees are often unprepared for the legal, financial and emotional responsibilities the role entails. Worse, they may face undue influence or capacity issues that compromise their ability to act in the best interests of the estate.
As an unfortunate example of undue influence, a patriarch serving as trustee became entirely dependent on a caregiver for his daily needs. This caregiver isolated him from his daughters, changed the locks on his home and persuaded him to create a trust for the caregiver's grandchildren. Such scenarios are heartbreaking but also preventable with the appointment of a corporate trustee.
Corporate trustees can offer an impartial, professional alternative. Unlike family members, a corporate trustee doesn't age out, lose capacity or develop emotional conflicts of interest. This neutrality preserves healthy family relationships and ensures fiduciary responsibilities are upheld.
Beyond the logistical benefits, a proactive estate plan can mitigate the emotional strain that often accompanies wealth transitions. For example, I worked with a family that inherited a strip mall in Los Angeles. Purchased by their grandparents, the property was deeply sentimental to one sibling, but financially burdensome to the others. Despite a lucrative offer to sell, the emotional attachment of the sibling serving as trustee created a rift that took years to heal.
A corporate trustee could have handled the situation differently, prioritizing the long-term financial well-being of all beneficiaries. By removing emotions from decision-making, corporate trustees can help families avoid these types of conflicts, fostering unity instead of division.
Protecting the Next Generation
One of the most meaningful aspects of estate planning is preparing the next generation to manage the wealth they inherit. This involves more than financial education; it's about instilling values and fostering stewardship. Trust provisions can be structured to encourage responsible behavior, support charitable giving and provide for future generations without creating dependency.
By engaging in open conversations about your intentions, you can help your heirs understand their roles and responsibilities. This transparency reduces the likelihood of misunderstandings and ensures your legacy is managed in a way that aligns with your vision.
A Call to Action
As UHNWIs, you have the resources and influence to shape your family's future for generations. Don't let procrastination or a false sense of security jeopardize the legacy you've worked so hard to build. Proactive estate planning is not just about protecting assets; it's about preserving relationships, minimizing stress and creating a roadmap for your family's continued success.
Whether it's revisiting your powers of attorney, appointing a corporate trustee or ensuring your trust provisions reflect your values, every step you take today can prevent potential crises tomorrow. Estate planning may not always feel urgent, but its impact on your family's future cannot be overstated. As someone who has spent decades helping families navigate these complexities, I can't emphasize enough the importance of starting early.
Sharon Perlin is a Senior Vice president and Client advisor at Whittier Trust's Seattle Office, which celebrates its 25 anniversary this year.
Featured in Family Business Magazine. For more information about proactive estate planning, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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