Talking about money with your nearest and dearest can prove challenging. However, when it comes to structuring personal finance and building wealth, your greatest asset is a productive discussion about the future.
Wilson Pateras’ Director, Nicholas Pateras unpacks why conversations around money can be so challenging and why it’s so important to work through these blocks and what family groups can do to best protect their wealth.
Why do families often find it difficult to talk about money?
It’s true that money can be a bit of an ‘elephant in the room’ when it comes to family conversations.
This is largely because when we’re talking about family and money, those who generated the conversation (generally) needs to be led by those who generated the wealth. For instance, if Mum and Dad have gone about their working lives building wealth, children may feel it’s not their place to enquire about their parents’ financial plans.
In this sense, the answer lies in parents driving the conversation around money. At Wilson Pateras, we’ve had circumstances where the individuals holding wealth wish to include their children in the conversation – but this remains a rarity.
Because of this reluctance, conversations around money are often thrust upon families, rather than brought up strategically. In the event of family illness or death, family groups are often left unprepared to discuss money matters.
Another reason that individuals find the topic of family money challenging is that they want to avoid conflict. When parties perceive financial allocation or wills and estates to be unfair or unequal, emotions become heightened.
This is where an accountant, for example, can enter as a neutral party. The law can be quite transactional around estates; however, accountants can stand back objectively.
Are these uncomfortable conversations worth the emotional labour?
Every family has to make this judgement based on their unique circumstances. One of the reasons individuals are not transparent about their financial situation is that such discussions can reveal familial fault lines.
I would encourage people to be transparent, open and focused on addressing any issues they may have around their financial position. If an individual does become ill or pass away and major issues remain in their wake, it can come as a terrible shock.
How can families work with their accountant to shore up their wealth as a group?
A great strategy for families looking to consolidate their wealth is to appoint their accountant the position of ‘project manager’. Whilst individuals often perceive an accountant as transactional – simply preparing compliance documents and signing the paperwork – a person can get far greater value out of their accountant if they choose to truly engage.
Appointing your accountant the role of ‘project manager’ will result in far more meaningful wealth facilitation. They’ll have productive conversations and for instance, they’ll critique processes, ask questions of family members and act as a source of information.
At Wilson Pateras, we understand the complexities around assets such as how items are held in what entities. Additionally, we understand the ownership structures. We’re planners, but have the technical skills to lead the ‘project manager’ role. When estate planning, people naturally gravitate towards lawyers. Where lawyers are transactional, accountants build enduring relationships.
What is a useful way that families can build and safeguard their wealth?
The family trust remains a robust planning tool. A family trust allows the individuals who control the trust to pass on that control to individuals within, or outside of the estate. Similarly, a trust can survive an individual and their assets can be passed on to family for years to come.
How can parents safely support their adult children to invest in property or business?
This is quite a common query from Wilson Pateras clients who are parents. There are several ways parents can encourage their children to invest without risking their own funds. This begins with the right corporate structure. Simply passing money on to children is something many parents are not comfortable with. They fear that their children will see the finances as a gift and use them however they see fit.
Modern parents do not want to lose control of their wealth this way. To address this concern, Wilson Pateras recommend legal structuring. In short, this ensures that parents have the ability to claim back the funds, via loan agreements or on the basis of written documentation.
In this way, the agreement could be seen as ‘conditional money’ whereby parents provide their kids with a good foundation for their future and it is appropriately protected. This agreement will be based on Wilson Pateras’ understanding of each individual family’s dynamic and circumstance.
Accounting for Families
When planning for your family’s future, Wilson Pateras’ expert accountants are here for you. Our experienced team will support your tax, investment and finance needs so that you can focus on putting your plans in motion. Get in touch with Nick Pateras and the team at Wilson Pateras for a complimentary meeting to discuss your family plan today.