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“Keep the Money Together”: Governance and Your Family’s Financial Legacy

However it’s phrased, it’s an occurrence that’s all too common: one generation builds great wealth, only to see it dissipated by the descendants who, instead of stewarding their legacy, largely wasted it.

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What issues should i consider before i retire?

In almost every culture worldwide, there’s a short, pithy proverb for the phenomenon of short-lived family wealth. In the US, we say, “Shirtsleeves to shirtsleeves in three generations.” In Scotland, the expression goes, “The father buys, his son builds, the grandson sells, and his son begs.” In Japan, they say, “From rice paddy to rice paddy in three generations.”

However it’s phrased, it’s an occurrence that’s all too common: one generation builds great wealth, only to see it dissipated by the descendants who, instead of stewarding their legacy, largely wasted it. In American financial history, a study in contrasts is offered by the Vanderbilts and the Rockefellers. Though Cornelius Vanderbilt amassed a great fortune by building railroads and shipping enterprises, most of the money was gone by the time he had been in the grave for fifty years. On the other hand, the Rockefeller family, whose fortune was built during the same era as the Vanderbilts’, have managed to maintain their wealth down through the years, while also contributing generously to American arts, conservation, healthcare, and many other worthy causes.

The difference lies in the governance structures—or the lack of them—instituted to protect the financial legacy. But what is involved in assembling a system of governance that can both protect the legacy and also empower its stewards to accomplish the principle goals for which the family enterprise was established?


Centuries ago, a wise person wrote, “Where there is no vision, the people perish.” Certainly, any worthwhile idea or enterprise starts because someone had a guiding vision and the determination to see it become reality. Moving from the “vision” phase to the “implementation” phase, however, requires capturing and codifying that vision in a way that allows it to become institutionalized. In other words, the vision for the future needs to be in writing, and it must be shared with all stakeholders, both family members and professional advisors. The vision must also be multigenerational, and this often means that it must go beyond the considerations of typical estate planning. Too often, estate plans give little or no consideration to what will happen to any generation beyond that of the grandchildren of the original founders. But for those who intend to institutionalize a legacy that can thrive for the long term, beyond even the lifetimes of those the founders will live to see.


For many first-generation wealth builders, the concepts of saving, budgeting, and controlled spending are second-nature. But for their children, who may have grown up with an assumption of many of the privileges wealth confers, these principles are unlikely to be as intuitive (just ask the Vanderbilts!). This is where a qualified, fiduciary wealth advisor can offer tremendous support as a financial educator. When children grow up in a culture of attention to the principles of sound financial management, they are much more likely to adopt these principles when they “come into their own.” Like the founding vision, this culture of educating the next generation must become part of the infrastructure, continuing over the years, if the wealth of the founders is to accomplish all that they intend. For a governance plan to remain effective through multiple generations, it must include professional, qualified educational resources to be provided for those who will be assuming responsibility for the legacy. And by the way, children as young as age six are old enough to begin absorbing the principles of good financial habits.

Succession planning

Closely related to education, a good governance strategy will provide for succession planning. Every successful business leader understands the importance of succession planning. For families seeking to maintain and build generational wealth, this is even more crucial. Good governance of the family enterprise can help to ensure that those who inherit leadership roles are ready for them. It can also provide guardrails against disruptions caused by the unexpected: premature death of a key individual; disputes among family members; and other events that can pose challenges to the smooth functioning of the family organization. A properly designed governance and continuity plan can help to institutionalize a shared vision, providing stability amid the passing of years and the inevitable changes that come over time. And once again, here is where a professional, fiduciary wealth advisor can offer invaluable service as impartial third parties and also as conduits for best-in-class governance practices and advisors.


And by the way, it may not surprise you to learn that many of these governance practices have little to do with special taxation strategies, or even investment or estate planning. Instead, they often focus on effective communication with family members around shared values, effective resolution of conflict, succession planning, proactive approaches to philanthropic goals, and other valuable principles. In other words, as in most other important areas of life, good communication is essential. To the extent possible, a good governance plan will “build in” processes, opportunities, and methods for passing along the most important priorities, values, and goals of the family enterprise from one generation to the next.

At Milestone Money, we know that our clients want to make sure that their financial resources are being deployed in a way that best reflects their values and most important goals. If we can help you begin building a plan to establish your financial legacy for future generations, we are eager to talk with you. Please get in touch for a free, no-obligation consultation.


What issues should i consider before i retire?

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Life is full of financial milestones. We pay for college, we get married, we start businesses. But the most important financial decision we will ever make is when and how to retire. Milestone Money helps you map success to and through retirement.

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