Is your mission to pass down your treasured home to the next generation? If yes, what should you anticipate? That was the question explored in a recent Wall Street Journal article titled, “Keeping the Family Heirloom House” by Amy Gay Merman. To avoid a “no surprises, no worries” result, the article’s bottom line is that it pays to plan early and well. Otherwise, it’s easy to imagine the family strife that, unfortunately, so often occurs.
In Texas, families often have a mission of sharing the ranch, commercial real estate, family business, etc. Complex legal structures are often used to help accomplish these goals and provide needed liability protection and tax planning.
An often overlooked consequence of sharing ownership is shared risk. Some examples include:
Unexpected disagreements;
Who pays for what;
A disruptive divorce. Who saw that coming?;
A sudden change of financial circumstances, need for money (now not later);
Death (including those where a child dies before a parent, sometimes referred to as a death out of order).
It has also been said, “If I die and if I have a plan.” The reality is there is only one ‘if.’ It’s “when I die,” not “if I die.” It is proven that families who develop a process for communicating and decision making are better positioned to anticipate and plan for shared risk.
This includes answers to the three “whats” for each family member — What to expect, what not to expect, and what is expected of them.
The simple truth is that not all family members will always want to share the same assets. Anticipating and planning for voluntary and involuntary exit strategies can help maintain family and business harmony while also optimizing monetary values for everyone. Since cash is often considered key in these situations, life insurance can be a valuable tool for liquidity. Shared ownership requires recognition of shared risks. Risks that can and should be identified, prioritized, and mitigated with appropriate strategies.
The need for this planning prior to real-life triggering events cannot be overstated.
From the entire C3 team, we look forward to collaborating with you.
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