Meeting The Needs Of Modern Families

Their needs are equally complex. Identifying and navigating their needs requires expertise and collaboration across borders, cultures and professions.

STEP published a research report, sponsored by TMF Group, in November 2021. Meeting the needs of modern families draws on feedback from over 600 professionals. It provides insight about the families that STEP members advise and their wealth and succession planning needs. It identifies the key complexities and constraints currently facing families and their advisors.

Families are evolving fast, no longer constrained by creed or culture, gender or geography. In this report, STEP calls on advisors and legislators globally to adapt and modernise in order to keep up with the needs of today’s families.

Key Findings

Families are changing, with ‘blended families’ on the rise

Over the past 10 years respondents have seen significant changes to families. Significant numbers of respondents have seen an increase in multi-jurisdictional families (78 per cent); cohabiting families (73 per cent); mixed-ethnicity families (61 per cent); same-sex relationships (54 per cent); and non-biological children (51 per cent).

‘Blended families’ are now commonplace, with 96 per cent of respondents now advising this type of family and three-quarters seeing an increase in the number of blended families they work with over the last 10 years. Although a smaller number, it is perhaps also significant that 10 per cent have seen an increase in transgender relationships.

Complexity is often leading to conflict

Conflict takes several forms, including generational and cultural conflict within the family. Cross-border legal and tax conflicts result from differences across jurisdictions, antiquated legislation and out-of-date language in wills and trust deeds. Respondents are increasingly seeing disagreement, breakdown in family relationships and litigation because of the complexity of modern families.

Specifically as a result of the increase in blended families, 71 per cent of respondents see the increased complexity in family dynamics as a challenge, and almost a quarter see them resulting in increased likelihood of litigation or a breakdown in family relationships.

Respondents highlight the difficulty of accommodating everyone’s needs; competing/differing interests and views between generations and/or as a result of different cultural perspectives; distrust and difficult relationships between prior and current members of the family; and as one respondent put it, “less “glue” to keep the family together”.

As respondents to the survey said: “increased cross-border work requires different bespoke structures. However, this is leading to greater frustration amongst families at the time and complexity of getting things done. Increasing different priorities amongst next gens [are] leading to greater difficulty in parents being fair and concern amongst parents that the succession of the business and wealth may be less certain. This, in turn, is leading to more tension in family relationships.

“Much more work [is] required to ensure that drafting of relevant documents are suitable for the family unit; increased risk of litigation making it essential that the client is protected as far as possible and increasing issues for firms who are drafting the documents.”

New family constructs and dynamics are driving demand

More complexity and conflict in families has resulted in increasing demand for advisors and their services. Tax advice, trusts, global/cross jurisdictional services and family governance advice in particular have all seen increased demand and succession planning tops the list of issues on which clients seek advice.

Family governance

Not surprisingly, given the identification of a greater trend towards generational conflict, 62 per cent of respondents have reflected that family governance has taken on greater priority. The same number have noted an increase in the use of professional advisors and 20 per cent note a greater use of family charters.

Keeping up with the times

Three quarters of respondents identified that cross-border or tax conflicts resulting from differences across jurisdictions are proving contentious and leading to litigation. Two thirds (69 per cent) of respondents highlighted generational issues and 65 per cent identified out-of-date language being used in wills, trusts and deeds.

Alongside a number of other disputes arising from unclear or old-fashioned language, it is clear that a number of laws and legal definitions are out of touch with the current reality and need to be brought up to date. Specific examples mentioned by respondents included laws in relation to cohabitation (relating to succession), same-sex marriage (recognition across jurisdictions, inheritance, adopted children) and inconsistencies with regard to lasting and enduring powers of attorney.

Family business friction

Conflict can be particularly damaging for family businesses, and three quarters of respondents are seeing a greater trend towards generational conflict within the family and disagreement in relation to family business succession.

The same number are seeing a trend towards next-gen philosophy, and these differing objectives from the younger generations are an important cause of tension. Another key trend noted is capacity issues – with 64 per cent of respondents highlighting this as an issue for families.

One size doesn’t fit all

There is no longer a one-size-fits-all approach to meeting families’ needs. Advisors are recalibrating their approach to ensure a joined-up approach. They are collaborating with other advisors to meet families’ needs and embrace a broader skillset to support increasingly complex family dynamics.

As one respondent observed: “We all need to be slightly less focused on our little patch and collaborate with other professionals locally and internationally to help the family achieve their best objectives.”

Respondents elaborated on some of the challenges associated with meeting the needs of the modern family in their comments.

“A lot more time and effort is required to be spent on a regular basis to understand relationships and family dynamics. Not a one stroke for all, or "template/standard" approach like it used to be, especially when information is so much more readily available. Values and mindsets are more diversely influenced.”

Just over half of our respondents said that they saw cultural differences within their client-base. In particular, a number of advisors raised the different cultural expectations, values and priorities in relation to Asian clients, highlighting the different expectations of descendants, hierarchies within families and resistance to giving up control.

Other examples noted were differences across different cultures in relation to inheritance laws, the role of women, approach to business and religious law. All point to the importance of advisors having a strong understanding of culture and language in relation to their client base.

Communication and early planning are essential

Respondents overwhelmingly identified the importance of good communication within families as the key factor. When asked what one piece of general advice they would give to families to prevent future issues, respondents overwhelmingly identified communication. Communication, particularly within families, with early and open conversations about planning and succession was the most important advice they could provide to families.

Of more than 200 free-text answers to this question, communication accounted for over a third of the responses. This emphasis on communication is a clear movement away from the traditional, more paternalistic historic approach of keeping younger generations sheltered from too much knowledge for as long as possible.

This approach is increasingly seen by advisors as archaic and being consigned to history. The other key piece of advice, and one that for many respondents was linked to communication, was to plan well in advance.

Addressing The Challenges

Navigating family politics is always difficult, but it has become even more challenging to advise the modern family as new generational perspectives are emerging. Identifying the current and relevant issues requires expertise on the part of the advisor and collaboration across borders, cultures and professions to ensure that families are getting the right advice.

STEP recommends the following actions for legislators, families and advisors.

Legislators urgently need to:

• Review legislation around cohabitation rights for cohabiting couples, siblings and those in platonic relationships across various jurisdictions. Existing legislation appears to be lacking, inconsistent or discriminatory.
• Revisit the legal definitions of family members, particularly the legal definitions of children and the differing rights of those children, and the current discrepancies in the law.
• Examine the inconsistencies and deficiencies of protective measures (such as powers of attorney) to enable clearer and more efficient planning for incapacity.
• Identify some of the more challenging tax-related issues that advisors face now that multigenerational families are more commonly living together across various jurisdictions and cultures.

For advisors:

• Advisors need to ensure flexibility in creating family structures and stress test these by running through different potential scenarios, avoiding overly complicated structures that can result in contentious circumstances.
• With the growth in multi-jurisdictional families, advisors need to ensure they understand cultural and legal differences between the jurisdictions, especially with regard to the nature of a family.
• The diversity and complexity of modern families requires bespoke planning to meet each family’s needs and, where appropriate, collaboration with other professionals locally and internationally to help the family achieve their objectives.
• Advisors must have an all-round skill set, beyond the technical skills and expertise that have traditionally been required, honing their soft skills specifically to better support the increasingly complex family dynamics highlighted in the survey.

For families:

• Clear, early and ongoing communication within and between the family and its advisors is more essential than ever, given the increased complexities within families.
• Early planning within the family and the family business regarding succession is crucial in avoiding conflict and difficulties further down the line.
• Family dynamics and relationships need as much care and consideration as legal and tax planning.
• Families and their advisors should regularly revisit wills, trusts and other documents to ensure they are up to date and reflect their intentions.

Emily Deane
Emily Deane TEP is technical counsel and head of government affairs at STEP. Emily has practised as a private client and trust solicitor in the UK, Bermuda and the Cayman Islands and she specialises in all aspects of the private client industry including wills, property, tax planning, estate administration, onshore and offshore trusts and litigation. Emily leads the policy and technical work at STEP informing public policy in relation to trust and estate-related issues.