Episode Transcript
LAUREN: Thank you all so much for joining us today. My name is Lauren Ferrara, and I’m the founder and chief storyteller of Why WaitStories, a legacy film production company based in Colorado, serving families across the nation. Today, we’re talking about “Turning Up the Lights: A Progressive Approach to Wealth Disclosure Conversations.” For many people, talking about money is seen as taboo, while open communication about money and wealth is touted as best practice in preparing the rising generation and maintaining family harmony. Many families just don’t know where to begin, when to start, and how much to share. Joining us today are Valerie Galinskaya, the Managing Director and Head of the Merrill Center for Family Wealth, and Shilpa Mirchandani, the Director and Center Principal. Thank you both so much for being here.
VALERIE: Thank you for having us.
LAUREN: Well, so before we get going, can you tell us a little bit more about what the Merrill Center for Family Wealth—or the Center—does to help families make sense of this complexity?
VALERIE: Yeah, absolutely. We're thrilled to be here, Lauren. Our mission at the Merrill Center for Family Wealth is that we work with about 370 ultra-high-net-worth families, and our focus is really on recognizing that wealth creates complexity. We help families navigate that complexity to build individual and collective clarity, communication, and productivity. We see ourselves as practitioners focused on providing actionable insight and helping families unlock what success means to them, putting it into practice in practical and intentional ways.
LAUREN: So conversations about wealth aren’t always easy, but how to tackle them is a common question among ultra-high-net-worth families. What approach do you recommend for families seeking guidance on this?
VALERIE: Absolutely. So, in our experience, first off, we find that many families, many clients, think about talking about family wealth as an all-or-nothing—almost like a light switch—meaning if the light is off, they are keeping family members in the dark as long as possible, oftentimes because they're concerned how knowledge of wealth may impede motivation or responsibility. On the other side, we see a lot of clients who think to themselves, “Okay, I'm going to turn on the switch,” and have a tendency to share a lot or everything at once. And based on our experience working with hundreds of families, we really encourage families to refrain from this idea of a light switch to a dimmer switch, if you will—essentially adopting a more progressive approach to wealth disclosure. In other words, you're really having a slower and methodical increase of brightness, quote-unquote, or transparency, where you're sharing information regarding wealth over time. And we feel so strongly about this because we believe that this framework offers a pathway between these two extremes: leading family members completely in the dark with no information, and then also not turning on the floodlights so quickly that you're disclosing everything at once and making it very difficult to process. With this approach, we've seen that family leaders can start by sharing information at a very high level—observing how it's received—before gradually disclosing specifics over time, structures, dollar figures, and the like. In other words, they can gradually turn up the lights, and at the same time, the rising generation—and I think this is a really important point—can better contextualize the information and be able to learn, ask questions, and provide feedback. So it's a real, collaborative conversation versus feeling like this one-directional, you know, announcement or disclosure.
LAUREN: Yeah,I love that metaphor. It makes so much sense to me. This is a really great framework to help families have a thoughtful conversation about wealth. Can you speak to the steps families can take to initiate these conversations?
SHILPA: Yeah, I'll chime in. So, the dimmer switch framework really involves three main steps. The first step is family leaders simply start the conversation. By discussing and clarifying what the purpose of the wealth they've created is, they define and outline the principles that govern the use of their wealth and their understanding of their core values. They can then include other family members—often young adults or adult children—in the conversation. The next step is to discuss how the purpose of the wealth has really informed the existing structures that the family has created. This includes any trusts, custodial accounts, philanthropic vehicles, as well as any gifts and support that they're providing, and any contemplated estate planning in the future. Finally, after there's clarity on both values, purpose, and structures, they can start to disclose the actual amounts in each of those different structures, and these can be revealed incrementally. For example, amounts in one trust may be shared while amounts in another trust or structure may be kept private until a later date. Some family members may only be ready to share dollar amounts within a year or so; for other family members, it may take several years. The speed of sharing more granular information really depends on the family circumstances, the age and maturity of the rising generation, and how ready they are to have these conversations. So it's not for us to say what's right or wrong for them—it’s for the family to determine the pace.
LAUREN: Thanks, Shilpa. Well, it seems like this framework is really rooted in intentionality and defining purpose. Valerie, can you give us an example of how families of wealth do that?
VALERIE: Absolutely, Lauren. So first off, in our experience, families who succeed in maximizing the individual well-being of their members and also sustaining values and wealth over generations are the ones who take the time to ask and answer key questions about the purpose of their wealth. Needless to say, the quantitative aspects of wealth—like investment strategies, estate planning vehicles—are clearly vitally important, but we found that too often, families lose sight of the qualitative aspects of wealth, so asking questions like, "What is this financial capital for? What are our goals as a family? What does success mean to us? What do we hope to see and do within our family and our local and global communities?"—and that's why, to your question on intentionality, we find that it's incredibly important for families to take the time to define core shared values and understand how those values impact their interactions, impact their decision-making, and ultimately translate those values to goals and structures. In other words, how do they operationalize their values? On a practical note, we, within the Merrill Center for Family Wealth, developed a proprietary tool in partnership with Money, Meaning, and Choices a number of years ago called the Value Card Exercise. We've used it over 2,000 times with different families, and most recently, I had a Zoom call with a first-generation wealth-creator couple who sold a business for a significant sum—over $100 million—and they were really wrestling with the impact of this wealth on their three young adult children, specifically around the question of how to empower them and enjoy the fruits of their success while being concerned that the scale of the wealth might impede the motivation of the kids. We used the exercise with them, and there were really two key ideas that came out. One, this idea—both mom and dad, husband and wife—called "skin in the game," meaning how can their children benefit from support for education, some support for a first-time home purchase, and still develop resilience? That was the key point that came out of the values. We spent some time talking about how they operationalize that—do they provide full support for a first-time home, or is it a portion, and the kids have to do the rest? The second point that came out, which was very interesting and that we see a lot of families grapple with, is this notion of fairness versus equality. I always say anybody who has two or more children is naturally dealing with this. The husband and wife had different viewpoints: the wife leaned more toward equality, while the husband was more curious to understand what fairness means—for example, if one of their children pursues a career in finance and another in the arts. This led to a really helpful discussion and reflection on how that would apply in their gifting. In essence, it was really about starting with purpose and intentionality. They're both engineers, so I think they were arguably a little skeptical of starting too broad, but introducing this framework really allowed them to create an effective structure for these reflections and conversations.
LAUREN: So I'm curious about this family, where did they land on the home purchases?
VALERIE: Yeah, so for the home purchases, they landed on—again, related to the "skin in the game" idea—providing some support while expecting the young adult children to provide the balance. On the fairness versus equality point, they encouraged the children to reframe it less as a binary choice, where they have to pick one side, and more as thinking about what it means. So, what does that mean for gifting? What does that mean for contribution to their philanthropic endeavors? They were able to reorient more toward categories and realize that some things could be equal, while other things could be approached more from a fairness, quote-unquote, standpoint.
LAUREN: Interesting. Well, so when families think about disclosure, it's often coupled with a lot of emotion. How does the center help families quell some of these big feelings, as my daughter calls them?
SHILPA: Well, yes, very understandably, sharing these details regarding the family's wealth and estate plan can be very daunting for both the leading and the rising generation. When we work with families, we find that using another framework—known as Family Wallets—is really beneficial in helping define the purpose and expectations of the family's wealth across different structures in a very organized way. The Family Wallets framework offers a bird's-eye view of the organization of the family's wealth and connects it back to the family values and wealth purpose that they've articulated. This is a very different process from what some families may go through if they work with a more technical planner who may just present the full stack of estate planning documents, reading out the provisions in a very detailed way, but without a conversation about what the purpose of those trusts is or what they are intended to do for the family members. The Family Wallets framework is really intended to be a jump-start for those conversations with the rising generation without making it too overwhelming, and it is intended to be viewed from their perspective. The framework consists of five main sections. The first section is the rising generation's own personal assets, including their own earnings, savings, and any investment or checking/savings portfolios that they hold in their own name. The second wallet is direct gifts made to the rising generation, which I differentiate from indirect gifts, in wallet three. Direct gifts are typically made outright to the rising generation, or on their behalf—for example, annual exclusion gifts, tuition or medical payments made for them, support for their lifestyle such as a down payment for a home, or 529 accounts created for them or for their own children. Wallet three consists of indirect gifts made to the rising generation, typically through irrevocable gift trusts. Wallet number four includes assets still owned by the leading generation, and wallet five includes assets earmarked for charitable giving. We find it really helpful to organize assets into these categories because the purpose may differ for each. For example, I recently did a family meeting, and in wallet number four, the leading generation owned a beautiful, palatial home. The family had many questions they had never considered: What will happen to the home once mom and dad pass away? Do we want to keep it in the family or sell it? When should we sell it? Do we want it as a legacy home for our own families to enjoy in the future? This framework sparked conversations around that one particular asset but also about policies across all the different structures. Depending on the family's unique circumstances, we can modify these categories. For instance, if the family does not have philanthropic vehicles, such as donor-advised funds or family foundations, we can delete that wallet. If the family has dynastic trusts created by a prior generation, they may be included in a separate wallet, distinct from those created by the leading generation. Each wallet contains three key pieces of information: the assets in each wallet, the purpose of those assets, and the guidelines or policies for deploying those funds in alignment with the family's articulated purpose and values.
VALERIE: And to build on what Shilpa just highlighted, just to give an example, families often make annual exclusion gifts. We know those of you who are listening are likely very familiar with that. So, that would typically fall under wallet two within our framework—direct gifts to the rising generation, for example, if the family is not making them in a trust. An example of a value statement for that wallet might be, quote, "to provide ongoing support for overall well-being of a rising generation while maintaining accountability and responsibility." So, in the earlier example of some skin in the game—or certainly responsibility—the guideline for that gift may be that we encourage saving and making sound investments. For instance, the guideline may be that 50% of that gift goes toward saving, and the remaining 50% is to be used to support ongoing lifestyle expenses at the discretion of the rising generation. There’s a little bit of guidance, a guideline or a constraint, and a notion that the rising generation has the agency to make some decisions within the remaining 50%. In that way, we found that this framework provides a forum for multigenerational dialogue, really highlighting and discussing expectations and policies openly to ensure that both sides are comfortable with the benefits and requirements of gifts within each category. Typically, just to build on what Shilpa mentioned, when first introducing this framework to the rising generation, the dollar amounts are not included. Instead, we encourage the family to focus more heavily on purpose and guidelines, particularly with younger rising-generation family members or those who may not be as familiar with some of the terms. In my experience, for most people, it is very hard to conceptualize the difference between a million dollars, $10 million, or $20 million, because these are not amounts that are just given outright—often, there are structures associated with them. We find, again, that the dimmer switch approach is very helpful. By introducing these five categories, families are also able to do something that many have really embraced: looking at very complicated or comprehensive trust documents and asking, "Okay, if we had to summarize this on one page, really reinforcing purpose and guidelines, what would that look like?" It’s just an easier, more organized way to review and discuss the information.
LAUREN: Thank you. Well, I'm sure a lot of families out there ask if there's a specific age when they should start having these conversations with the rising-generation family members and their children. What kind of guidance do you have for that question?
SHILPA: Yeah, so conversations around values can really start when children are as young as five years old. As they get older, additional topics—like good money habits, budgeting, and differentiating between needs versus wants—can be integrated and tied into values. One way to put this into practice is to set up a committed time to speak on a regular basis, which could be a weekly dinner on a Saturday or Sunday night. For younger children, it could be a weekly or monthly get-together, even if it's just a brief 20-minute discussion of relevant money lessons learned during a certain time period. The key is consistency. For older children, as they get into their late teens and early 20s, it becomes more appropriate to start sharing information regarding structures using the dimmer switch and Family Wallets frameworks at a very high level, updated at least annually. It’s really important to ensure that these conversations are a two-way dialogue between the leading and rising generation, including questions, thoughts, and opinions from the rising generation, and making sure they are included and addressed appropriately and respectfully.
LAUREN: Thank you. So, Valerie, what are some common mistakes you see wealthy families making in navigating wealth disclosure, and how do we avoid those?
VALERIE: So, I think one common mistake—or maybe misconception—is really this notion, this pressure, this thought from families that they have to disclose everything all at once, or to put it another way, that they have to delay the conversation until they have all of their questions answered and all of the clarity. I remember working with one family—I’ve been working with them for a number of years—but originally, when I was first introduced to the wealth creator, he said something very interesting: a large proportion of his wealth was tied to concentrated stock. He was a former CEO of a very large company, and he said, "You know, I've delayed speaking about this to my five children because obviously the stock fluctuates and it can change." I paused, really actively listening to what he said, and I asked, "What is the delta over the last couple of years?" The delta was much narrower when you think about the broader perspective. I asked, "Is that really a deterrent? Do you think that's a deterrent?" He smiled and said, “Maybe it’s not.” I think a lot of this has to do with our own personalities. He’s a very detail-oriented, typical CEO in many ways, and he felt that pressure that it has to be perfect, it has to be exact. What I ultimately encouraged him to think about—and he came around to this idea—was that it does not have to be perfect. It doesn’t mean providing inaccurate information, but just starting that dialogue, reflecting his and his wife’s intent, what success means to them, and being candid about uncertainties can be really powerful. For his adult children, this was inspiring—they really appreciated and expressed gratitude for being let into the conversation. One mistake is thinking it has to be perfectly buttoned up. The second, which dovetails, is waiting to have these conversations. Unfortunately, many of you listening may have had this experience: people wait too long, and you never know—there could be a health event, or someone may no longer be present to share the information, among other challenges. If disclosure conversations are undertaken under time pressure—such as a prenup conversation after an engagement or a business sale requiring rapid sharing of information—it adds unnecessary stress. To pivot from that, it’s important to see disclosure as a process, not wait to start, and be prepared for that initial conversation.
LAUREN: It's so funny—in my legacy film work, so many people ask, "What is the perfect age to do a legacy film? Is it 70? Is it 80?" My response is, “It’s when you’re still here.” There’s that. But also, things can always change; there can always be another chapter to be written. Well, thank you for that. Considering these practical implications, what are one or two things you hope everybody listening right now will take away from this conversation?
VALERIE: I'd say the one thing, just from my end, is really that not communicating about wealth still sends a message to family members. I think a lot of times people take that for granted, or hold the notion—I'm sure you've seen this in your work—that they’re going to delay because they want it to be perfect or really harmonious in their mind, which is unrealistic. How many decisions can anyone make with 100% certainty? Recognizing that not communicating about wealth—whether for yourself or with respect to your clients—still sends a message is important. Family members, whether rising-generation or other relatives, will form their own preconceived notions. Not communicating doesn’t stop people from making judgments or assumptions. The other part of this is not thinking about disclosure as a process. You don’t need all the answers to start, but you do need to do thoughtful reflection upfront: What are you going to share? What does success look like to you? So it’s a dual notion: not waiting too long, but also not rushing in without reflection and anticipation of potential questions. We’re hopeful that our framework—which has been gratifying to see—really helps families reflect on what’s most important to them, put that into action, and start having these conversations.
LAUREN: And what about you, Shilpa?
SHILPA: Yeah, and adding on to what Valerie mentioned, these conversations are not easy for families. We try to normalize this for families who are grappling with these issues, but for families who do engage in them, it takes a lot of courage and vulnerability—both for the leading generation and the rising generation. These conversations might not seem urgent today, and ideally, they shouldn’t happen in the midst of some kind of precarious transition. As Valerie mentioned, it’s really important to start early with intention, and these conversations are ultimately crucial for building trust and understanding in the family over the long term.
LAUREN: Thank you. Well, Shilpa, Valerie, this was such a great conversation. I love the dimmer analogy, and I love the wallets. It just makes so much sense to me, and I’m sure our listeners would agree. Thank you both so much for being here and sharing your insight and expertise.
VALERIE: I’m so glad it resonates, and it’s wonderful to be with you both. So, thank you.
SHILPA: Thanks for having us.
