With the vast majority of family wealth disappearing within three generations of its creation, figuring out how to maintain family wealth is an urgent priority for high net worth families. David Herritt, Managing Director of the Northeast Region of GenSpring Family Offices, has provided us with a list of 25 ways to help maintain family wealth through multiple generations. These best practices are divided into six categories: Family cohesiveness, governance, mentoring, philanthropy, strategic planning, and trusts and estates.
1. Communicate your family history and culture and pass it down through the generations
2. Learn and develop teamwork and communication skills.
3. Explicitly discuss shared values.
4. Create a family mission statement, which acts as a unified expression from all family members of what principles you use to govern your family life.
5. Ensure each family member’s well-being, prioritizing each family member’s individual pursuit of happiness.
6. Use family governance, the practice of making informed decisions as a family.
7. Involve next generation family members in family meetings, which grow in complexity along with the size of the family enterprise.
8. Put into place family policies to document agreements and decisions from family meetings.
9. Create policies for conflict resolution, such as a code of conduct and processes for dealing with disagreement.
10. Create a succession plan for preparing and involving next generation leaders.
11. Seek financial education to instill family members with the ability to make smart financial decisions.
12. Develop parenting skills to create responsible beneficiaries.
13. Support entrepreneurship in the family, to both teach important skills and increase family cohesiveness and interaction.
14. Become versed in the effect that money has on family relationships, such as issues with fair treatment between siblings and financial inequality between spouses.
15. Proactively learn about and address the emotional impact of wealth on family members.
16. Provide support for philanthropy to convey family values to the next generation.
17. Involve children and grandchildren in shared philanthropy in order to impart on them the responsibility that comes with inherited wealth, as well as to teach financial literacy, create family cohesion, and instill family values.
18. Use strategic philanthropy to ensure you are able to give efficiently and maximize your positive impact
19. Define your wealth objectives, or long-term goals, and work on a plan to accomplish them.
20. Develop a knowledge of economics in order to clearly understand the impact of inflation, taxes, budgeting, and investment performance.
21. Prepare for major life events such as birth, death, divorce, marriage, illness, or sale of a business, as these are likely to involve wealth transitions.
Trusts and Estates
22. Communicate your intentions for wealth transfer to ensure that heirs are aware, informed, and prepared.
23. Mentor beneficiaries and grantors on the impact of inheritance and to provide education about wealth as a part of everyday life.
24. Understand the relationship between beneficiaries and trustees, so that each views themselves as an equal working toward a common goal of preserving wealth.
25. Carefully select trustees and advisors who are interested, invested, and capable.