25 Jan 3 Steps to Building a Family Wealth Consitution
The United States has weathered many storms in the centuries since our founding – depression, recession, war, social upheaval, terrorism. We have been led by wise leaders and by mere mortals who have been viewed harshly through the lens of history. Through all of the trials and tribulation, we have not only endured – we have ultimately thrived over the long run.
A key reason is that we are a nation of laws, not men, as President John Adams so famously put it. The source of those laws is our Constitution. We continue to debate the meaning and intent of this document even today. It continues to change and evolve over time. But it remains the bedrock of our constitutional democracy – helping to guide and shape how we determine our path forward. Whether you consider it to be a divinely inspired document or riddled with some critical flaws, there is no question that it remains a civic model for emerging democracies all over the world.
Like countries, families who enter into business together can benefit from establishing robust constitutions – not simply to lay out the rules and processes, but to establish a shared vision of where the family wants to go. I have written before on my blog of why it is so important for families to create such a contract. But how can you go about getting started?
Every situation will surely vary, but here are some good first steps that are crucial during this process.
- Hold an initial meeting with key members of your family to discuss challenges the business could potentially face – and how a constitution can help. This may be an area to consider bringing in an outside moderator experienced in working with family businesses and wealth management, but you can also find a ton of resources online to help you get started.
- Draft and design the document, seeking input from your family stakeholders on the most important elements. Make sure that all voices at the table are heard – and consider the perspective of those who aren’t at the table. (Perhaps there are family members who haven’t been born yet.) Don’t just think about the best-case scenario – think about your greatest fears of calamity that could befall your business.
- Finalize and discuss the document. One of the most helpful qualities of constitutions it that they afford families the opportunity to communicate openly and proactively ahead of potential challenges. Embrace the opportunity – you may wish to schedule regular meetings, potentially on an annual basis, to potentially make amendments. Your constitution should be a living document, able to meet changing conditions as your business evolves with time.
Make no mistake – this can initially be a lengthy, even emotionally taxing process. It can pay large dividends in the long run, however, and even serve as a unique bonding experience. I would argue that your family cannot afford to not prepare itself for the unknown with a wealth constitution.
Has your family drafted one yet? If not, what’s holding you back?