1. Focusing on Your Family
Michael Lachance
Virginia Cooperative Extension

2. The Williams Group researched the
causes of failure with 3,250 families
over four decades and reports 2/3
of all wealth transfers fail after
transition!

3. Estate planners generally provide
reliable guidance on tax, wealth
preservation, and governance.
The most common reason for failure is
poor family communication,
including gossip and anger, and loss of
trust.

4. Family Wealth
• The developmment of responsible adults
is the goal of wealth preservation
• Primary wealth:
– Human Capital
• (the aptitudes individuals possess)
– Intellectual Wealth
• (what each individual knows)
• Secondary wealth is financial capital

5. Where does your life have it’s
greatest impact?”
• Work
• Family
• Other?

6. Genealogy
• Patrilineal and matrilineal histories
• Most family histories are traced through
marriages, burials and land ownership,
missing many important parts of the story!
• Research family “stories” and share with
others in and out of your family
• Has wealth been continuous or have there
been disruptions?

7. Net Worth
• Everyone needs to take inventory
• America Saves
http://www.americasaves.org
Site includes introduction to other
instruments as well
• Current problem for young people: little
incentive to save.

8. Major financial issues
• Education expenses
• Retirement planning
• Risk management
including expenses of
health care

9. Learning to speak to family members
about financial management
• Continuum of family communication: from
strict silence to full disclosure
• Communication styles differ within and
between generations
• Books: to read and avoid
• Financial advice: can help or hinder

10. Preparing for Financial Discussion
• Do careful planning prior to holding a
meeting where wealth transfer issues are
discussed
• Give adequate advance notice to
everyone
• What is the best location?
• Consider assessment activities & audits to
get the process started
• Third parties can help or harm the
discussion

11. Family Wealth (Again)
• Family goal of preservation of wealth over
a long period of time
• Primary wealth:
– Human Capital
• (the aptitudes individuals possess)
– Intellectual Wealth
• (what each individual knows)
• Secondary wealth is financial capital

12. Family Governance
• Identify shared values
• Develop family goals
• Create a family mission statement
• Discover, build and use individual talents
• Strengthening family relationships
• Recruit and work with advisors outside the
family

13. Family members should have the
willingness to invest time, energy, and
money into learning how to work as a
team to preserve their wealth as a
family blessing.

14. Have everyone complete this
questionnaire:
• What are your individual passion?
• Define your big dream?
• What big gift your family could give you
that would achieve, propel forward your
life?

15. Although well over 90 percent of all corporations
(and many of the largest public corporations) in
the U.S. are family owned or controlled, the
average life expectancy of such organizations is
only twenty-four years, and only 30% of family
firms survive into the second generation.
SMR Forum: "Managing Change in the Family Firm -- Issues and Strategies,"
Beckhard, R. and Dyer, W.G., Jr., Sloan Management Review, 24:3 (1983 Spring)
WHY FAMILY GOVERNANCE?

16. How family governance time
should be spent
70-80% emphasizing families
assets
30-20% focused on liabilities
within the family

17. “...only one third of businesses successfully make
the transition from each generation to the next
...and that figure has been very stable, and is true
around the globe...“
Prof. Joe Astrachan, Cox Family Enterprise Center
Kennesaw State University, Georgia
The Economist, page 69, 5 Nov 2004
WHY FAMILY GOVERNANCE?

18. Family is the basic unit of culture
• Define the values and goals of the group
• Gain acceptance to be governed by the
family, if seen as a loss of freedom, what is
to be gained by aligning with the family
• Vertical vs horizontal linkages; roles of siblings
and cousins are critical for wealth retention
• Practice joint decision making
• Wisdom of elders needed to resolve disputes
• Trans-generational activities are critical

19. PROBLEM: FOIBLES OF
HUMAN COMMUNICATION
• Learn from your dinner table
• Learn from your marriage
• Acknowledge the long drive home
• Encourage engaging in civic life

20. Outcomes of Family Meetings
• Forces everyone to think about their goals for
their wealth and their children
• Causes the younger generation to think deeply
at an earlier age about their own goals for their
families
– Hazard: children change as they mature, but the older
generation may tend to treat them as though they
were still inexperienced

21. Most Important Factors
of Wealth Transfer
• Levels of trust and communication among
family members
• Degree to which the heirs are prepared for
wealth and responsibility

22. Most Important Factors
of Wealth Transfer
• Levels of trust and communication that
exist among family members
• Degree to which the heirs are prepared for
wealth and responsibility

23. Goals for Family Wealth
1. Development of trust, communication and
teamwork within the family
2. Preparation of heirs to manage
themselves and wealth effectively
3. Reaching agreement on the mission of
the family's wealth as a guide to the
family's professional advisors.
4. Professional advisors need to realize that
the family is their client, not just the
grantors!

24. Wealth Management Ideas
1. Develop a mission for the family wealth, along
with a strategy, structure, and roles to
accomplish it
2. Offspring invest sweat equity to become
competent to managers of all or part of the
family business, charitable foundation, or large
amounts of capital
3. Develop standards, such as successful work
experience outside the family, as preparation
for specific roles.

25. Wealth Management Ideas
1. Develop a mission for the family wealth, along
with a strategy, structure, and roles to
accomplish it
2. Offspring invest sweat equity to become
competent to managers of all or part of the
family business, charitable foundation, or large
amounts of capital
3. Develop standards, such as successful work
experience outside the family, as preparation
for specific roles.

26. FINAL THOUGHTS:
What about the spouses
• Are these people assets to the family at
large?

27. FINAL THOUGHTS:
Equality versus Fairness in
Disbursements
If someone is handicapped in a certain way,
that person might require more.

28. FINAL THOUGHTS:
Does Grantor Plans Preclude
Subsequent Creativity
Beneficiaries may want to develop a new
property or start their own business.
Can they convert the transferred wealth to
more liquid assets in order to allow them to
take advantage of emerging opportunities?

29. FINAL THOUGHTS:
Philanthropy
• Philanthropy becomes natural bonding
agent to family discussions
• When families work on a transition plan
with council, they often commit more
resources to philanthropy or at least think
harder about their community goals

30. Philanthropy Ideas
Create a family foundation to make grants
focused on:
– Shared belief
– Youth
– Education
– Environment
– Programs that strengthen community through
collaboration and/or development

31. Can You Call Your Family
Together?