When a loved one passes, they leave an estate consisting of all their assets – ranging from investment and bank accounts to their wedding ring and antique armchair. These assets must be gathered, inventoried, valued, and maintained during what is called Estate Administration. Once the many formalities required under state and federal law are satisfied, assets can finally be transferred to heirs as directed by the deceased’s estate planning documents – usually a Will, Revocable Trust (also called a Living Trust), or both. Where a Revocable Trust is used, it must still be paired with a Will (called a Pour-over Will) to ensure assets not previously transferred and titled to the Revocable Trust ‘pour’ into the trust at death and are distributed according to its provisions. The intersection of federal and state tax and administrative and property laws often results in the process taking significantly longer than most anticipate, with even seemingly simple estates requiring several months or even years to fully settle. To help prepare you for the intricacies of this process, we have compiled the following core concepts and commonly asked questions.

It’s a scenario for many entrepreneurs and senior executives: You’ve spent your career helping to build a successful company and have reaped the professional and financial rewards. As you near retirement or a profitable exit from the business you love, you need to prepare for the next phase of life.  You know that retaining a large position in a single entity may be too risky for your retirement years and the rational choice is to shift from building wealth to preserving it. The first step in this next phase is the uncomfortable process of divesting from your concentrated stock holdings.

There are many reasons why you should do this, which we will highlight in this piece, as well as many behavioral biases that prevent individuals from doing what is in their own best interest.  We will explore both of those factors, as well as the number of innovative options available to help address concentrated stock risk. These solutions include selling programs, hedging strategies, charitable solutions, and risk sharing.

Money can be a challenging topic of conversation for a parent to have with their children because the stakes feel high. In discussions around succession planning, the top concerns our clients share with us are: What will happen if I share too much? Will they lose motivation to work? Will they expect more support financially? Am I setting them up to spend lavishly?  

Thoughts like these are common and understandable but worrying about the outcome should not stop you from doing the best you can to prepare for the moment they are in charge. These conversations often serve as an incredible opportunity to work as a family to determine what is important and to learn about each other. Approaching the discussion with an open mind and curiosity is key for you and your children to create a succession plan that works for both generations.