Technical complications, changing tax regimes, and insufficient governance structures are frequently identified as common reasons for estate planning failures. While these factors hold relevance, the most challenging cases do not occur due to technical faults, but rather because hidden psychological factors were at play, skewing critical decisions that quietly distorted judgement.

This article examines psychological risk during periods of wealth and life transition and its relevance to interdisciplinary estate planning practice. The aim is not to describe or provide therapeutic or coaching support. Rather, this paper aims to outline how psychological processing is one of the most prominent features, yet the least considered, when advising around risk during ultra-high-net-worth wealth (UHNW) transitions and succession planning. Neglecting psychological factors can risk significant consequences that are irreversible and extend across generations.

Transitions as a Planning Risk Multiplier

Estate planners often work with clients during periods of transitions such as:

• Liquidity events.
• Business exits.
• Divorce or remarriage.
• Blended family formation.
• Succession or leadership handover.
• Sudden changes in health or capacity.

These moments trigger a sequence of technical activities. However, despite decades of well-established research evidencing how such events alter emotions and decision-making processes of the individuals’ leading transactions,[i] in practice this is frequently neglected.

Transitions do not only change circumstances; the perception of risk, authority, and responsibility change both intra- and inter-personally[ii] Psychological and personal identity changes occur during this process – which occur rapidly due to our fast-responding survival mechanisms and adaptive nervous system.[iii] These psychological and biological changes happen faster than legal or financial structures can keep up, and thus advisors often miss the point at which to recommend psychological input. As a result, decisions made during these periods may be internal yet are misaligned with external long-term planning objectives.

Why Intelligence and Experience Are Not Protective

There is a persistent assumption: intelligent and successful individuals are less susceptible to judgement (so long as “emotions are controlled”). Based on the authors 15+ years of psychological risk advisory experience, the opposite is true.

Highly intelligent clients are typically:

• Articulate in their reasoning.
• Confident in decision-making.
• Capable of constructing compelling narratives for their choices.

We have seen this masking underlying instability in judgment, in line with extensive field research.[iv] Individuals defend decisions convincingly and argue their actions to align with their strategic intent. Their argument typically appears convincing and agreeable to advisors, even though risk remains unaddressed. For example,

• Parents may rewrite succession logic under “fairness” to treat children equally, whereas in reality the parent is responding to guilt, family tension, and identity shifts rather than long-term governance realities.
• “Simplifying governance” arguing for a more efficient structure, when in reality they reduce oversight due to feeling constraint or discomfort with rise in authority and visibility.
• Rewriting marital financial structures after remarriage noting trust in their partner, but truthfully prioritising relational harmony and alters inheritance expectations risking future conflict, litigation, along with wealth and familial fragmentation.

For advisors assisting UHNW individuals and families, this becomes difficult to distinguish: how to decipher between decisiveness and distortion when both are presented with confidence?

Where Psychological Risk Enters the Planning Process

Psychological risk most often appears at times at points of transitional events that carry long-term or irreversible consequences,[v] including:

• Changes to beneficiary designations.
• Restructuring of ownership or control.
• Alterations to succession or governance arrangements.
• Disproportionate allocations framed as “fairness” or “simplification.”
• Exclusion or repositioning of family members.

At the time, decisions may appear rational with “pros and cons” in pursuit of logical steps forward. However, it is exactly at these times when common psychological experiences:

• Emotions such as shame, frustration, guilt, and fear.
• Interpersonal dynamics including control, hierarchical power-plays, failed trust, or inadvertent manipulation.
• Self-perceptions involving grandiosity, loss of self, and uncertainty of worth and value.

Such psychological experiences are often minimized, and “safety” is sought in holding onto technical processes and legal structures, though you cannot escape psychological risk through governance.[vi] It is only after a substantial period of time has passed that the risk then emerges, when consequences escalate across family systems and governance structures that are difficult to recover from.

The Interdisciplinary Blind Spot

Estate planning is inherently collaborative. Attorneys, financial planners, insurance professionals, tax professionals, and trust specialists each assess risk through their respective lenses. Psychological factors, however, continue to fall between disciplines.

Most practitioners encounter early indicators of judgment distortion indirectly:[vii]

• Heightened urgency without clear cause.

• Intolerance of professional challenge.
• Sudden shifts in long-held planning principles.
• Repeated plan revisions without resolution.
• Discomfort among advisers that is difficult to articulate.

Psychological risk has not traditionally sat within a standard family office system. Therefore, this discipline may either incorrectly be absorbed into other categories (e.g., legal protection or succession planning) or could be categorized as optional therapy as opposed to psychological assessment, mapping, and strategizing across systems. Consequentially, errors or misjudgement may still occur unconsciously leaving UHNW individuals and families exposed.

Psychological Risk as a Planning Consideration, not a Diagnosis

Importantly, psychological risk in this context does not suggest pathology, incapacity, or mental illness. It refers to predictable human responses to power, loss, responsibility, and identity change.[viii] This is part of the greater human experience, and UHNW individuals or families are not immune from this. Rather, money becomes an amplifier for what already exists psychologically. These responses can temporarily alter judgment without impairing competence.

Framing psychological risk as a planning consideration rather than a personal issue would allow practitioners to remain within their own professional boundaries while still recognizing its impact. This does not require other advisors to become psychologists – but it requires them to recognise when a psychological risk advisory service is necessary to avoid unspoken risks. Such action could take transitions and decision-making processes from unstable to stable and secure, long-term.

Implications for Estate Planning Practice

Neglecting psychological risk factors can potentially lead to:

• Governance structures that fail under family stress.
• Succession plans that provoke conflict rather than continuity.
• Questioning insurance and liquidity strategies.
• Advisors becoming reactive rather than preventative.

Conversely, considering judgment stability would better position practitioners to:

• Pace decision-making appropriately.
• Encourage structured deliberation.
• Document rationale more carefully.
• Coordinate interdisciplinary input with greater sensitivity.

These adjustments could reduce long-term risk without altering the technical quality of the plan itself.

A Preventative Lens

The most effective estate planning is proactive and preventative of risk rather than crisis-management. Recognizing psychological risk early can facilitate containment quietly through pacing, processing, clarification, and appropriate professional support external to the planning team. If ignored, potential conflict, litigation, or regret can become costly outcomes for families and professionally burdensome for advisors.

Final Comments

Estate planning occurs at the intersection of law, finance, insurance, and human decision-making. Transition periods include several junctures of decision-making and recognizing psychological blind spots can strengthen interdisciplinary judgements, reducing risk of long-term errors. Including psychological advisory would provide an understanding on the condition under which decisions are made.

For practitioners committed to long-term family continuity, this perspective represents an important – and still underdeveloped – dimension of risk management in complex estate planning.

About the author

Dr. Sarah Alsawy, expert psychologist and founder of Auctoritas, a private psychological advisory practice focused on decision-making risk during major life and wealth transitions. With over 15 years of clinical experience, her speciality is working with senior leaders and UHNW clients who face complex situations and require thorough and discreet services.

www.auctoritasadvisorygroup.com

sarah@auctoritasadvisorygroup.com

[i] Marques, R. H., Violant-Holz, V., & da Silva, E. D. (2024). Emotions and decision-making in boardrooms: A systematic review from a behavioural strategy perspective. Frontiers in Psychology, 15, 1473175.

[ii] (Kahneman, 2011; Loewenstein et al., 2001). Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus, and Giroux.

[iii] (Sullivan & Al Ariss, 2021). Sullivan, S. E., & Al Ariss, A. (2021). Making sense of different perspectives on career transitions: A review and agenda for future research. Human Resource Management Review, 31(1), 100727.

[iv] (Kahneman, 2011).

[v] Thaler, R. H. (2015). Misbehaving: The making of behavioural economics. W. W. Norton & Company.

[vi] Vives, M.-L., Heffner, J., & FeldmanHall, O. (2023). Conceptual representations of uncertainty predict risky decision-making. Cognitive, Affective, & Behavioural Neuroscience, 23, 1153–1166.

[vii] (Ahmed et al., 2022): Ahmed, Z., Sabir, S., & Khosa, M. (2022). Behavioural biases and investment decisions: The role of risk perception. SAGE Open, 12(2).

[viii] (Loewenstein et al., 2001). Loewenstein, G. F., Weber, E. U., Hsee, C. K., & Welch, N. (2001). Risk as feelings. Psychological Bulletin, 127(2), 267–286.