How Family Governance Can Help Your Family Preserve Wealth for Generations

Steven Zeller |

Acquired wealth can act as a blessing or a curse for a multigenerational family. It can let families experience comfort and freedom in their lives and allow them to contribute to the community. Or it can promote overindulgence, laziness and lead to tension and fighting within the family.

Without a solid plan, a family can expect to sit by and watch their financial assets disappear in the process of handing down wealth to new generations. Worst of all, when it happens, the family often fragments and relationships are destroyed.

Regrettably, the axiom "shirt sleeves to shirt sleeves in three generations" has truly been the case for a countless number of affluent families. A great deal of this failure can be linked to traditional estate planning which only recognizes financial assets at the expense of ignoring intellectual wealth and human wealth.

Intellectual wealth consists of knowledge, education and life experiences of family members. Human wealth is the persons and their life satisfaction.

To preserve and develop financial wealth, families must focus their attention on fostering human and intellectual wealth. A family that takes these sources of wealth into account is much better prepared to grow their wealth for the upcoming generations.

A narrow focus on just financial wealth, while deserving of its own place, often ignores the whole picture of wealth which can lead to problems. Maintaining family wealth, formally called legacy planning, is a process consisting of these vital steps:

Conduct a Family Retreat

Host a retreat in a relaxed, isolated area to ensure that you will be free from distractions. The purpose of this meeting is to spend a high quality, deep thinking, and soul searching session dedicated towards determining the heart and soul of the wealth creators and their family.

This meeting typically lasts for a day and covers various topics in order for the wealth producers to achieve the goal of determining not only their values and goals, but to also create the family vision statement, the mission statement, financial philosophy statement and a financial letter of intent.

These meetings are carefully facilitated by a trained family legacy consultant and sometimes a family counselor trained in legacy planning that attends as well. The result of this meeting is a rough draft version of a written legacy plan which is designed in exact accordance to the wealth creators wishes in a way that is aligned with the vision, mission, and financial philosophy statement.

Hold a Follow-Up Meeting

This step is potentially a little more challenging as the heirs will be attending this meeting and all kind of issues can potentially arise. This meeting takes a little more preparation.

A pre-meeting phone interview of each heir is often found to be beneficial and is conducted by the facilitator or trained family psychologist team member. This stage of the process can bring up, potentially, some serious issues between heirs or the parents, but is also professionally facilitated in a way that is intended to build unity and closure which is very beneficial for the family as a whole.

This event will mark the beginning of family governance. All immediate family, the legacy planning coach and a trained family counselor should attend. You should introduce the idea of family governance, review the various forms of wealth and discuss the culture that you wish to create for your family.

The documents created at the family retreat should be opened up for discussion. The idea is to get your whole family on board for the plan which you have created, take ownership of the process and begin to assume their roles in the governance focus on what's important.

Implement the Required Estate Planning

This is the step to take care of the necessary entities such as dynasty trusts, family charitable foundations and other entities or trusts that will legally support the philosophy, vision and mission of your family. These entities should be created with a long-term perspective that will promote the human and intellectual wealth of the family, and thereby work to protect and grow financial assets for many generations.

Build the Family Leadership and Governance

Family governance should be reinforced through regular family meetings. Leadership roles in the family should be established at the first family meeting. As time goes on, decisions in family meeting must be made to support the family vision, mission and financial philosophy statement.

This is a very important practice, because not only does it further put in place and strengthen the required leadership of the family members and promoting the preservation of the three forms of family wealth, but it also helps to keep the family together by building bonds.


Steven Zeller, Advisory Services offered by Zeller Kern Wealth Advisors, a Sacramento Wealth Management firms and a Registered Investment Adviser.