Integrating Family Governance Into High Net Worth Estate Planning 

Large, multi-generational families often rely on traditional estate planning to meet their needs. For wealthy families, the most comprehensive estate planning strategies may be insufficient to truly ensure that the family’s wealth and success are protected through the generations. This is where family governance comes in, helping not only to preserve family wealth but also to cement a family legacy that is true to the family’s values. Family governance strengthens communication among family members, reducing disputes and making decision-making easier. An experienced Naperville, IL estate planning attorney can advise your high net worth family on how to implement family governance strategies into your estate plan. 

What Is Family Governance?

Family governance is a system that large families implement to facilitate communication between family members and create a cohesive values system that impacts everything from the way the family designs and executes its estate plan to the way it educates its members. Most family governance plans have three main parts, although each family is different and not all families implement every aspect of family governance. 

Traditionally, family governance first establishes a family constitution that establishes the values and policies that will guide the family. The family constitution is usually the most popular family governance document. It typically describes the family’s values, its leadership and decision-making structure, and the methods that the family members will use to communicate. It should also put in place a process for amending the constitution. Next, family governance generally calls for annual family meetings. Finally, a family governance plan will likely establish a family council to represent the larger group of family members, like a “board” for the family. 

What Are the Benefits of Integrating Family Governance Into Estate Planning?

Preserving Wealth 

One of the goals of estate planning is to preserve family wealth. Family governance helps preserve wealth across family members and generations by strengthening cohesiveness. This becomes especially important as families grow and time passes. Using family governance, families formulate and pass down values about the preservation of money—how to spend it and save it. This encourages future generations to develop the same kinds of wealth-preservation skills and values that served the family well when it made its wealth. 

Preserving the Family Legacy 

Family governance also educates and promotes values about charitable giving. In this way, families can reinforce their family legacy across generations. The charitable giving processes established in the estate plan are emphasized across the family unit and passed down to successive generations, so that the wealth family members receive is spent in part on continuing to cement the family’s legacy. 

Avoiding or Minimizing Disputes

Families grow and change over time. Particularly in high net-worth families where members might be benefiting from the family’s wealth but can have different life experiences and values that guide them, this can lead to conflict. Even in the simplest of settings, family members can disagree, and when these disagreements are centered on money, they can put a strain on the execution of the most well-crafted estate plan. By creating a set of rules that guide all family members, a family governance plan can help avoid miscommunication and disputes. It can also strengthen communication and fraternity between family members, further reducing the potential for disputes about the estate plan–and everything else.  

Navigating Changes

The first generation to make a great deal of wealth might look very different from the fourth generation to possess this wealth. The estate planning tools that served a family years ago might not be the best option for family members in contemporary times. Family governance plans put processes in place to navigate change more effectively. This helps families make decisions more efficiently, and these decisions can then be implemented through estate planning amendments. This can be particularly helpful when navigating succession planning, a key issue that comes up in estate planning for wealthy families. 

What Are the Best Practices For Establishing a Family Governance Plan?

Create a Family Mission Statement and Constitution 

The first step in creating a strong family governance process is to develop policies and procedures to guide the family moving forward and set these down in the family’s constitution. These should include at a minimum information about policies related to conflict resolution and succession planning. A family mission statement should focus on the family’s values around money, charitable giving, community, and family. 

Meet Regularly

A key family governance practice is making sure that family members meet and communicate regularly. These meetings not only serve to provide a literal space for communication but also strengthen the family’s core values. Meetings can focus on financial education initiatives intended to preserve the family’s wealth. They can also serve as an opportunity for family members to learn about charitable giving options that align with the family’s goals for its legacy. 

Leave Space for Disagreements

Multi-generational high-net-worth family members may have different opinions and perspectives that guide the way they make decisions. Particularly when establishing the family governance plan, it is important to leave room for these different perspectives. Family governance facilitators should establish and communicate ground rules and a code of conduct for family members to abide by to help deal with disagreements. 

Put in Place Governance for Specific Assets

A family governance plan can be a good way to specify how family members may use certain special family assets, which can help maintain these assets and minimize conflicts about them. This would work in tandem with the estate plan. For example, a family governance plan may specify how and when family members can use certain family properties, and what the family members’ maintenance obligations towards these properties are. 

Call a Naperville, IL Estate Planning Attorney

Estate planning can become much more complicated when it involves large estates and wealthy families seeking to cement their legacy across the generations. This is where family governance comes in to help create a cohesive family wealth and estate planning strategy. The experienced Naperville, IL estate planning attorney at The Gierach Law Firm is here to advise your family on weaving family governance considerations into your estate plan. Call the firm to speak with our attorney at 630-756-1160.