{"id":12997,"date":"2023-11-15T13:08:18","date_gmt":"2023-11-15T13:08:18","guid":{"rendered":"https:\/\/iqeq.com\/?p=12997"},"modified":"2023-11-15T13:09:28","modified_gmt":"2023-11-15T13:09:28","slug":"the-family-constitution-preserving-wealth-for-generations-to-come","status":"publish","type":"post","link":"https:\/\/iqeq.com\/insights\/the-family-constitution-preserving-wealth-for-generations-to-come\/","title":{"rendered":"The family constitution: preserving wealth for generations to come"},"content":{"rendered":"
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What constitutes a family constitution? And why is it important?<\/strong><\/p>\n

As families evolve and successive generations seek to establish themselves as valued contributors to the family business or its philanthropic activities, many families thrive by establishing a \u2018roadmap\u2019 for navigating wealth, business and legacy transitions over time, governing how the family will work together and resolve potential conflicts in the future.<\/p>\n

These guidelines often take the form of a family constitution \u2013 a document that prescribes the family\u2019s values and principles, defines its objectives, and outlines how the family will make important decisions.<\/p>\n

The family business constitution<\/h2>\n

Within the context of a family business in particular, a family constitution can be crucial in smoothing operational and leadership transitions between generations. Indeed, I\u2019ve witnessed this first-hand recently supporting such a business transition through its third generation.<\/p>\n

A family business constitution can help the business to crystalise and understand its competitive advantages and what makes its culture unique and sustainable. It should also clearly address and define the various roles of individual family members, both inside and outside of the business.<\/p>\n

Of course, this is easier said than done.<\/p>\n

Based on my recent experience in this area, the following article summarises my key thoughts on how to create a family constitution that enables seamless business and wealth transitions.<\/p>\n

1. Remember, it\u2019s not a product<\/h2>\n

Many families interested in a family constitution may believe that the implementation process is as easy as a call to the lawyer to get a constitution drafted and in place. However, family constitutions that have been drafted without sufficient input from the family often create more problems than they resolve.<\/p>\n

A family constitution is not a simple product, but rather a uniquely personal document. Its development must be a process that occurs within the family.<\/p>\n

Indeed, my experience is that it is the process of discussing, debating and expressing the family constitution, rather than the end result, that produces the most benefit. It\u2019s this process of drafting and establishing a family constitution that can bring a family closer, as participants learn more about each other, the family\u2019s history, and shared motivational values.<\/p>\n

It can actually help to unite the family and the document itself can become a source of family harmony, as well as providing a focal point for the business going forward. And really, that\u2019s the whole point!<\/p>\n

2. Ensure clarity, avoid jargon, make it engaging<\/h2>\n

Avoid overly technical language as it is often not necessary to achieve the desired legal, tax and administrative results. Technical language does not help in a family constitution, which is not legally binding.<\/p>\n

Instead, the family constitution should have accessible and personal language. The family\u2019s philosophy and values should be the cornerstone of the document.<\/p>\n

Critically, there should be a section within the family constitution that sets out the family\u2019s statement of values. It\u2019s unfair to expect future generations to uphold those values if the family does not take the time to articulate them. It is the family\u2019s values or mission statement that will serve as the foundations for future generations to lean on.<\/p>\n

Fixing into the document a sense of the family\u2019s history and historic personalities can also produce a far more meaningful and enduring commitment than simply asking each family member what his or her values are.<\/p>\n

3. Plan for change, deadlock and difficult decisions<\/h2>\n

No family can predict the future, and no family constitution can accurately address all the obstacles and changes the family is likely to face. So, my thoughts have always that \u2013 rather than creating a set of rules that aim to prevent every likely conflict or strife \u2013 the family constitution should provide a process for discussion, resolution and management of deadlock.<\/p>\n

In other words, the constitution must assume there will be conflict, and provide a roadmap out of the situation. You might also consider testing the concept whilst in the design phase, with the family members foreseeing a challenge to use as a proof of concept.<\/p>\n

It\u2019s important to remember that the family constitution will not create specific and binding rules. It\u2019s a framework and guiding principles for making future decisions in each area.<\/p>\n

4. Keep it as a live document<\/h2>\n

Nothing is constant in family dynamics and it would be a fantasy to expect a single, unrevised family constitution to withstand the many changes that will occur in the future. A point often forgotten is that, as generations grow up, future family members may not feel an allegiance to a constitution that they did not have a hand in creating. Revisit the family constitution every five years.<\/p>\n

It may be a consideration that the family constitution has a sunset clause activated at a certain point so that new leaders within the family can come forward.<\/p>\n

5. Define the overarching goal for the family and its business<\/h2>\n

The family mission statement<\/a> is a key part of the family constitution \u2013 the family values statement, in a nutshell.<\/p>\n

To me it encapsulates the question, \u201cwhat\u2019s the point of our family trying to pull together?\u201d<\/p>\n

The statement may be as simple as: \u201cThe mission of our family is to create a secure family environment and to provide opportunity for each individual to become responsibly independent, and effectively interdependent, in order to serve worthy purposes in society.\u201d<\/p>\n

While a mission statement may seem like a small piece of the puzzle, a simple statement that encapsulates what motivates and inspires a family can truly lay the groundwork for a more complete family constitution in the future.<\/p>\n

Speak to IQ-EQ<\/h2>\n

At IQ-EQ we have demonstrable and significant experience in mediating and overseeing the creation of effective family constitution documents. The effect being the protection of the family dynamic and a symbiotic relationship with the family business for the long term. Contact me to find out more:<\/p>\n <\/div>\n<\/section>\n\n

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Meet the author<\/h2>\n
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Adam Garwood<\/h3>\n

Director, Private Wealth, Jersey<\/p>\n

<\/div>\n

Jersey<\/p>\n \n Send email <\/a>\n \n +44 1534 714315 <\/a>\n

\n \n LinkedIn<\/span>\n <\/a>\n <\/div>\n <\/div>\n<\/div> <\/div>\n
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More from Adam Garwood:<\/p>\n

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When is a family office not a family office?<\/a><\/h4>\n

In this article, Adam shares his own experience of servicing family offices to highlight the fact that many are not actually fully-fledged family offices; many only perform one aspect of the full FO function. Drawing upon personal anecdotes, Adam discusses the missing pieces.<\/p>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n<\/section>","protected":false},"excerpt":{"rendered":"","protected":false},"author":6,"featured_media":13081,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[1],"tags":[],"expertise":[360],"service_category":[364],"acf":[],"yoast_head":"\nThe family constitution: preserving wealth for generations to come - IQ-EQ<\/title>\n<meta name=\"description\" content=\"Adam Garwood explains what constitutes a family constitution and why it's important.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/iqeq.com\/insights\/the-family-constitution-preserving-wealth-for-generations-to-come\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The family constitution: preserving wealth for generations to come - 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