- “Blended families” have increased sharply since 2011, research shows
- But legislation has not kept pace with the changes in families
- STEP is calling for reforms as well as better communication to avoid conflict
Nearly two thirds (63%) of wealth and succession planning advisors say that complex, cross-border, mixed-ethnicity and cohabiting families now make up a meaningful proportion, or in some cases the majority, of the families they advise. The finding is part of new research published today by STEP, the professional association for practitioners who advise families across generations.
Just under three quarters (73%) of the 613 lawyers, tax advisors, wealth managers, trustees and others from around the world who took part in the research have seen significant rises in the number of so-called ‘blended’ families seeking advice from them in the last ten years, and 96% now advise these families to some degree.
Significant numbers of advisors have seen an increase in multi-jurisdictional families (78%); cohabiting families (73%); and mixed-ethnicity families (61%); and more than half had seen an increase in same-sex relationships (54%) and non-biological children (51%) in the families they advise.
These changes bring increased complexity, with such families often facing distinctive challenges when planning for their financial futures and succession. These range from cross-border legal and tax conflicts between different regulatory regimes, to generational and cultural divisions within families themselves.
Antiquated legislation and out-of-date language in wills and trust deeds has failed to keep pace with the rise of blended families in recent decades. Participants in STEP’s research are increasingly seeing disagreement, breakdown in family relationships and litigation among the families they advise due to this modern complexity.
To reduce this conflict, respondents overwhelmingly identified the importance for all families of good communication. Early and open conversations about financial planning and succession is key to avoiding conflict. But STEP also believes there is an urgent need for governments and legislators to review outdated laws – such as those around cohabitation rights, powers of attorney and cross-border tax – which are currently lacking, inconsistent or discriminatory when applied to blended families.
Emily Deane, Technical Counsel at STEP, said: “Families are evolving fast, no longer constrained by creed or culture, gender or geography. But modern families can be complex, challenging, diverse and all over the map – often literally. Planning for their financial futures requires expertise and collaboration across borders, cultures and professions.
“Unfortunately, legislation has failed to keep pace with the times, especially in key areas like cohabitation, the rights of non-biological children and the ways that different countries’ tax systems interact. The experts who took part in our research reported increasing conflict and litigation within modern blended families because of these factors.
With the publication of our new report, STEP is calling on advisors and legislators globally to adapt and modernise to keep up with the needs of today’s modern families.”
Key recommendations from STEP’s Meeting the needs of modern families report.
Legislators urgently need to:
- Review legislation around cohabitation rights in relation to cohabiting couples, siblings and those in platonic relationships across various jurisdictions. The existing legislation appears to be lacking, inconsistent or discriminatory
- Revisit the legal definitions of family members, particularly the legal definitions of children, their differing rights and the current discrepancies in the law
- Examine the inconsistencies and deficiencies relating to the creation, recognition and enforcement 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
- 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
- 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 succession planning is crucial for family businesses to avoid conflict and difficulties later on
- 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