Wealth chats with family members are a good thing, right? Not always, says Merrill Lynch

Spontaneous conversations about family fortunes can lead to regrets, new report warns.

When it comes to managing family wealth, conversations between generations is generally considered a positive step, but not always.

Discussing potential inheritance and planning how and when that should happen can help prepare heirs and avoid misunderstandings, with advisors seeing better outcomes for those that do, but a new study found that such talks do not always end well.

The Merrill Center for Family Wealth, part of Merrill Private Wealth Management, polled ultra-high-net-worth families and found that 26% of respondents to the report ‘Pulling back the curtain: Wealthy families open up about money, relationships, and decision-making’, regretted having an unplanned chat about family wealth.

Almost eight in ten families who had recently discussed wealth had done so spontaneously and 33% said they had increased these conversations since the pandemic. However, they often lack the plan, process, or skills to make well-intended conversations productive and this can lead to family feuds, stress, and under-functioning heirs.

FAMILY FORTUNE CHALLENGES

The study found that while half of respondents said financial decisions were shared across two or more generations, 54% said their biggest challenges when co-managing shared assets is limited governance, including a lack of transparency or clarity about roles, responsibilities, and how decisions are made, by whom.

Most families continue to provide some kind of financial support for adult children and heirs, with 39% covering lifestyle expenses including living costs and repayment of debts and loans.

Of those planning to make gifts within their lifetime, 56% intend to do so equally between children or other family recipients, while 35% will do so on a case-by-case basis considering factors such as age, financial need, and the amount of time they devote to the family.