In global estate planning, an asset protection structure to deal with the founder’s material wealth is only part of an equation. It is equally important to consider the family governance structure to protect the intangible assets of the family.
Great families are distinguished by their achievements and redeemed failures, the values and principles they espouse, the causes they champion, and their contributions to the community. These families thrive on trust, unity, and open communication. Members are collaborative and results oriented because they share a common vision. These are the intangible assets that make up the true wealth of the family.
In Asia, the extended family unit where multi-generational members live in the same household or in close proximity has been, until the 1980’s, the thriving model. In this system, common meals, traditions and endless family gatherings produce the glue that holds the family together. Values, principles, family identity and vision are passed on orally or witnessed in the lives of parents, grandparents, uncles, aunties, and other extended family members. This lifestyle allows greater connectivity and increased sharing of cultural and cross-generational family values.
The extended family household is no longer a given. Due to political, demographic and socio-economic reasons, Asian families are more dispersed. Hence the platform that promotes close communication and interaction, and the oral tradition of passing family values and visions are fast disintegrating. Deliberate measures must be taken to counteract these deteriorating trends.
A family governance structure that corrals the family as they grow across generations is essential. The drafting of a family charter may be the first initiative towards this end. The charter acknowledges the family’s roots and records defining moments of its past. It expresses the family’s values, beliefs, vision and mission. It speaks into the future.
In the family governance structure, entities and processes are put into place to facilitate communication, foster trust, and encourage interaction between family members. The aim is to instill and perpetuate family unity and identity, and to cultivate values and traditions. For example, annual family retreats are organised for “DNA-networking”. A disciplined approach towards philanthropy is embraced to encourage a habit of giving. Family members are invited to participate in committees established for various family purposes.
The family governance structure is intended to work in tandem with the asset protection structure. Family members are educated to understand the stewardship concept of wealth transition advocated by the founder. They are taught the appropriate way to deal with the advisors. On the other hand, an advisory committee consisting of appointed family members keep the asset protection structure well-informed of the ever evolving profile and needs of the family.
It is aptly observed that great families do not happen by accident. The lament in traditional estate planning bemoans the fact that the assets receive more attention than the heirs. A holistic global estate plan, on the other hand, defines wealth to include the human capital, reputational capital, spiritual capital and other intangibles of the family. A structure that deals with material wealth as well as the family as an organic unit is a balanced equation.
In achieving this equation, it is necessary to work with multidisciplinary teams of advisors who can turn theoretical advice into action plans. Equally important is to engage the participation of family members where appropriate. The hope is that the founder’s estate plan will be woven into the fabric of the family and the legacy of his wealth continues to flourish across generations.
When a founder invests time to transition his true wealth, the likelihood is that the founder’s life will in the final analysis serve as a prologue to the unfolding stories of his succeeding generations.