Effective succession planning is now the single biggest issue for high net worth individuals concerned about ensuring the successful transition of wealth from one generation to the next. They face a growing number of choices and challenges, not only in relation to the ongoing management of the assets but also in ensuring that their shared values and vision can be safeguarded and that the agreed objectives of the family members can be met. Private Trust Companies and Family Offices have developed to become ideal platforms for preserving and enhancing the value of family wealth. However such structures are only effective if there is proper governance in place. Jersey is an ideal location for Wealth Management for numerous reasons, not least because practitioners have considerable expertise in these keys areas.
Family Councils
It is important to have a structure that allows family members to participate in the ongoing management of the family's wealth, within an environment that is wholly supportive and that provides an educational framework for younger family members in particular. Increasingly, family councils are being created. A family council is an organised forum that allows family members to interact directly with their professional advisers.
A family council can be responsible for:
- Developing a Code of Practice establishing the mechanism for the family and their advisers to interact together
- Establishing family values and a vision for all members to follow so as to ensure that the family identity is maintained
- Providing a mechanism to assist in decision making on key issues
- Providing a mechanism for agreeing the transition of assets from one generation to the next
- Providing a forum for the education of the family on the responsibilities of wealth management
- Encouraging a sense of responsibility amongst the family Members
It is the development of an effective working relationship between family members and their advisers that makes this structure really effective. by having a good governance structure, family members are more likely to see themselves as custodians of the family's wealth and work together to preserve and grow this for the collective good of the family. The risk of not developing such a structure is that important decisions could be made without due and proper consideration which in turn can undermine the unity of the family. A lack of governance leads not only to the family's wealth not being optimised but, in many cases, being eroded and wasted.
When the family wishes to organise the management of assets for future generations, but individuals within the family have differing objectives and views, family governance becomes particularly necessary. Governance is more than simply a structure as it requires the establishment of a process for decision making that helps to avoid any potential conflict.
Trusts are intended to enhance the lives of the family members whether young or old. However, this can only be achieved when combined effectively with sound governance policies and practices. The likelihood of the successful transition of the family wealth to the next generation is significantly increased with proper governance in place.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
