Family Matters: Governance, Generational Transfers, and (Sometimes) Awkward Conversations

In my work with family stewards, some of the most ticklish questions come up around the topic of governance. This is especially true as wealthy families begin considering the implications of transferring the responsibility for maintaining and growing family wealth to the next generations.

Awkward or not, however, timely communication, both among family members and with outside advisors, is crucial for developing, maintaining, and passing along to younger family members the habits and practices of good governance. In fact, the absence of such practices is typically the number-one cause of fractures, not only among family members, but of the family’s wealth.

Here are three situations that often arise, along with some ideas for creating smoother transitions and encouraging development of good habits in younger generations.

1. Put in place benchmarks and incentives in the trust documents.

“The kids know they don’t have to work.” This is a very common problem. As children grow up in a privileged environment, they often go through a stage—typically in the teen years—when they lack motivation to apply themselves, believing that “the family money” will always be there to fall back on.

Smart family stewards, however, put in place benchmarks and incentives in the trust documents: 25% of the child’s inheritance is granted upon graduation from college; additional access comes with reaching the age of 30 and holding steady employment for a specified number of years; bonuses become available for attending and participating meaningfully in family business meetings. By incentivizing younger family members to transition successfully into adult responsibilities, the family is also creating a pool of capable leadership for preserving the family’s wealth into the future.

2. Create a values education plan.

Especially for wealthy multigenerational families, it is important to create continuity around core values and mission. Because the understanding of these values needs to span two and often three generations, such a plan needs to be tailored to the sensibilities of each generation, and it needs to be revisited and updated, probably at least annually. Attention to “telling the story” to each generation insures that family leadership continues to grow out of a shared set of priorities, even as its style and expression changes over time—as it must, in order to remain relevant.

3. Get outside help when you need it.

In cases where a family has a single CEO-type figure providing critical leadership, succession planning can create intra-family tension. One smart solution is to incorporate outside consultants in the transition process, in effect creating an impartial “search committee” to assist the family with identifying the best candidate. In fact, this process can be codified in the trust documents, insuring that all family members’ expectations about the process are based on the same assumptions. Family members who aspire to greater leadership roles can submit résumés, participate in interviews, and fulfill other requirements as set by the consultants. The chief advantage of this approach is its objectivity; the family is more likely to believe that the succession process was fair and unbiased, rather than rooted in family politics.

As a professional, fiduciary financial advisor, I assist family stewards with asking the tough questions and having the awkward conversations when necessary. If I can help you or someone you know with questions about governance of a family trust, please get in touch.

Stay Diversified, Stay YOUR Course!

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.

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