FA-IQ reached out to advisors to ask: What are the most common wealth transfer mistakes families make?

David Darst, chief investment officer at Americana Partners. Houston-based Darst has been in the industry more than 35 years. Americana Partners had $2.6 billion in client assets as of October 2021, according to the firm’s latest Investment Adviser Public Disclosure ADV.

“The so-called Great Wealth Transfer represents the predicted passage of more than $30 trillion in a wide array of capital assets from the baby boomer generation to 90 million millennials over the next decade.

In several decades of observing, planning, revising, facilitating and participating in the investment mandates involved with wealth transfers between generations, several common mistakes have been observed. In many cases, the suboptimal effects of these pitfalls can be minimized — or avoided altogether — through close attention to some or all of the following six guidelines:

1. Catalog Completeness: The wealth of the predecessor(s) and the inheritor(s) needs to be forensically inventoried and viewed comprehensively, across all public and private asset categories and asset classes.

2. Parties Inclusion: Holistic thought needs to be devoted to the goals and objectives of more than one generation, with particular attention paid to all current and potentially future persons inheriting and continuing the legacy of their predecessor(s).

David Darst
3. Compliance Robustness: Terms, conditions, and directives should be spelled out in writing and should comply with appropriate federal, state, local — and possibly international — legal and tax statutes.

4. Toolset Breadth: The full array of intergenerational wealth transfer tools needs to be considered, including accounting, legal, wealth advisory, investment advisory, cybersecurity, insurance, settlement, and custody resources.

5. Time Attentiveness: It is important to establish realistic time frames within which to plan, structure, and effect the wealth transfers.

6. Communication Thoroughness: Perhaps most crucially, robust transparency, full communication, and complete involvement of all appropriate parties need to be sine qua non — essential — hallmarks of the wealth transfer process at all stages. In the words of Benjamin Franklin (1706–1790) ‘Councils [meetings] to which counsel [opinions] hath not been invited, time doth not ratify.’”

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