6 Ways to Manage Family Wealth and Create Your Family Legacy

How to Develop Your Family’s Purpose and Make an Impact Through Generational Wealth

Wealth is a means to an end—living a great life. Successful families work hard to build and manage family wealth, not for the sake of achieving some number on a balance sheet, but because they want the wealth to support their family life and legacy. Whether you use a family office or do it yourself, there is more to creating a legacy than making investments.

As a family’s wealth grows, it is easy to get consumed by the numbers, from taxes to balance sheets to interest income, etc. There comes a point when it may be a good time to take a step back and reflect on the why—your family purpose—to assess whether your wealth and hard work are helping you to achieve a greater purpose in life.

What is Your Family Legacy?

A family legacy serves as a framework to help guide family decisions. It helps ensure that your family’s hard work and wealth supports you in living your best life, however you may envision it.

A family purpose is comprised of:

• Family Mission: Who we are and what we are about
• Family Vision: Where we want to go and how we will get there
• Family Values: The values that have guided us in the past and that will shape our future

Why Develop Your Family Legacy?

Developing your family legacy is a process that requires time, reflection, dialogue between family members, the sharing of family stories and a willingness to listen. When families develop their family purpose:

• They create unity and cohesion among family members, especially among the generations.
• They develop clarity about who they are, what they value and where they’re going.
• They gain greater peace of mind, because they focus on the big picture.

Families that develop their purpose allow them to focus on the things that are most important to them. It also helps them confidently utilize their resources to help achieve their purpose.

6 Ways to Manage Family Wealth and Pursue Family Purpose

Here are six ways to use your wealth to pursue your family purpose and live a great life:

1. Spend Quality Time with Your Family

Use your wealth to spend more quality time with family. This may mean transitioning a business earlier in order to do so, or simply being more intentional about prioritizing family gatherings, vacations or retreats.

Sociologist Dr. Dennis Jaffe told the New York Times about the key to a “hundred-year family.” It isn’t business decisions, in fact, that makes a legacy last—it’s the strength of the family’s relationships. He states, “They made the choice to invest in the family. They’ve seen that the quality of the people in the family and who they are is going to determine if the family succeeds in the future. The business decisions are important, but they’re really derived from the quality of the family.”

2. Pass on the Family Legacy to Future Generations

Legacy is very important to most families. Successful families typically accumulate and manage family wealth through hard work, risk-taking and discipline. But the challenge that many families face is that, as the generations continue, the values and character that gave rise to the wealth become a distant memory. Become intentional in passing on the family legacy through telling stories and sharing memories, specifically ones that highlight your values.

It’s also important to have frank discussions about your estate plan, especially if there are multiple heirs, in order to avoid or soften conflicts between members of future generations. A family legacy may be destroyed if the conversation is avoided.

3. Make an Impact

Families are often very generous and want to give back. But no two families do this the same way. Many families choose to give back—to make an impact on their world—based on their values and experiences. How families choose to give back and impact the world is typically tied back to the family mission.

4. Prioritize Health and Wellness

All the money in the world can’t buy health and longevity. Families should prioritize health and wellness to lead longer, more active and fulfilled lives. Ultimately, your family’s well-being is your greatest asset!

5. Give the Next Generation the Opportunity to Take Risks

Many families who have accumulated wealth did so by taking risks and being disciplined. This is why some families have made it a priority to support future generations in ventures that were not possible for them on their own. For some young people, this might mean joining or even starting a venture capital firm. For others, this might mean a tech startup. For many families, supporting these kinds of endeavors hearkens back to a spirit of entrepreneurship and risk-taking that gave rise to their wealth in the first place.

Many families who have accumulated wealth did so by taking risks and being disciplined.

6. Educate Your Family Financially

The best way to manage family wealth and fulfill your family purpose is by ensuring that the entire family has the financial literacy to make it possible. Lloyd Kurtz, head of Social Impact Investing at Wells Fargo, states:

“One of the challenges we run into is the difference in financial knowledge across family members. Sometimes you’re in a room with one who wants to know the Sharpe ratio of the portfolio, and right next to them sits someone who has no idea what that means. Our goal becomes meeting both of them where they are so everyone can get something of value out of the discussion.”

I encourage you to look beyond the numbers to help you define your family purpose and develop your family legacy. What are the things most important to you and your family? How can you manage family wealth to provide the flexibility to pursue these passions?

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: The Legal & Tax Aspect of Investing: Asset Protection; Estate Planning, and Tax Efficiency and Goal Based Investing- Planning for Key Life Events. This is an updated version of an article originally published on December 21, 2018.]

©All Rights Reserved. July, 2020. DailyDAC™, LLC d/b/a/ Financial Poise™