How To Avoid Fights Over Family Inheritance

By Linda Davis Taylor, Author of The Business of Family: How to Stay Rich for Generations

Money can either unite or divide us. The money doesn’t decide. We do. Financial circumstances can change. Jobs come and go. Illness may strike. Divorce happens. We have more MBAs in the world than ever; yet, it’s the family balance sheet that remains misunderstood. How can we avoid fights over a family inheritance? The answer is found in running and managing your family and wealth like a business. When problems arise, family members must be just as unified around a common purpose as members are in a business.

The old proverb “shirtsleeves to shirtsleeves in three generations” relates to the challenge of successfully transitioning wealth past the second generation. It predicts that the money will be gone by the third generation. When that time comes, family members may have never met the family’s founders. To transition wealth from one generation to the next, we also must transition our mission, values and stories to future generations.

Define family values with a mission statement. Family values that are frittered away can do generations of harm. Defining values and practicing them is a strategy every family can use to prevent anybody from taking a shortcut that doesn’t pay. Even in families that have a family business family members don’t always stay involved in it. Passing on the founder’s vision for the family through a mission statement provides continuity for succeeding generations.

Having a written statement helps them remember it. Remembering it makes it important. Perhaps they didn’t hear the poignant personal stories of the challenges that were overcome. More than likely they didn’t have the matriarch or patriarch as a mentor.

They may have the trust fund, but money alone doesn’t create the ties that bind. This is why families need a mission statement. It instills the family’s most important message in the minds of the succeeding generations. This can be expressed in a single sentence.

You can’t be one and done. A smart company would never have just one “make it or break it” meeting to relay its objectives to employees. Be it at work or at home, financial matters can rarely be summed up in a matter of minutes. Money talks shouldn’t be treated like texts. Though they can be short and to the point, they require some time and effort. Families need more than a “shared data” plan. They need a shared strategy that really pays off.

Schedule meetings. Even if the family version of a business meeting is in the living room rather than the boardroom, a regular gathering will keep confusion low and morale high. From the family calendar to family finances, including everyone in the discussion keeps the mystery out of how important decisions are made.

It’s a forum for conversation, information, and solving problems. Whether it’s a daily check-in or an annual retreat, family meetings are where the business of the family happens.

Involve everyone to create a foundation of trust and openness. Businesses develop their people and strive for goals where everyone has something to gain. A family that identifies and utilizes each member’s strengths lays a foundation of trust and communication, the two most crucial ingredients for working together well. All families face problems, as do all businesses. Those that forge real partnerships with their people will prosper.

Set goals. Whether it’s a company revenue target or an IPO, a family vacation or a family vision, having goals that are specific, realistic, and inspiring creates enthusiasm and optimism. The mission sets people on course. The goals get them there.

With a purpose defined and milestones set, the family has a head start on becoming a winning team. Small accomplishments lead to bigger ones. One set of goals leads to the next, and the seeds of success are sown.

Develop smart family HR. In business, the role of mentors in passing on corporate wisdom is a priceless asset. In a family, mentorship is equally essential. Handing down history and insight from one generation to the next is smart human resources for the family.

Run your family like a team. Keeping your family ties intact takes teamwork. Well-run companies appreciate that no one person has all the best answers. They analyze, discuss, and look ahead to the future before acting. Families should also have a way to share information when they make decisions. Whether in a business or a family, being heard is a right and a privilege for each person. When members know why they are important to how the family runs, they stay motivated.

Use written family documents. Families can use written agreements as a tool to unite the members. Whether it’s one page or many, having a written family document gives a family staying power. When the members draft it, debate it, and adopt it, they can depend on it. Everyone shares, and everyone signs. Just like any constitution, the family document can be amended at any time.

Thriving businesses and thriving families share a lot in common when it comes to their strategy. They both have a mission that inspires and energizes the members by keeping everybody focused on what matters. Taking care of the members keeps them productive and happy. Goals and objectives establish necessary milestones. Strategizing allows us to sculpt a future that doesn’t just fit our family’s needs but also helps fulfill our dreams.

© 2015 Linda Davis Taylor, author of The Business of Family: How to Stay Rich for Generations

Author Bio: Linda Davis Taylor, author of The Business of Family: How to Stay Rich for Generations, is the CEO and Chairman of Clifford Swan Investment Counsel in Pasadena, California. A participant in a fourth generation family business, Linda is a frequent speaker on wealth transition, family governance, and philanthropy. In addition to her investment counsel career, she has had over twenty-five years experience in senior leadership positions at Emory University, Claremont McKenna College, Amherst College, and Scripps College. Linda has served as a trustee for numerous educational and non-profit organizations and is a co-founder of a private foundation. She and her husband are the parents of two adult daughters.