Family Dynamics Flashcards
Describe key family roles and positions for trusts
Grantor - individual that created the trust, transferred assets into the trust, and oftentimes, is the individual that pays taxes on the trust. Can be multiple individuals
Trustee - an individual or institutions that administers the instructions of the trust. Act as a fiduciary, must act in the best interest of the trust and the beneficiaries
Beneficiary - individual that receives benefit from the trust property. Can be multiple individuals, and for certain trusts, can be entities like charitable organizations
(?)
Describe key family roles and positions for closely held businesses
- Owner
- Key employee is someone that significantly impacts the business or operations; crucial to success
- Can create business succession plans and transactions that pass on business interest to family members or key employees
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Describe key family roles and positions for family foundations
- It’s a private foundation typically started by an individual or family that wishes to control most or all charitable donations
- Has the potential to memorialize a family name and pass on responsibility to future generations in regard to charitable giving
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Describe key family roles and positions for LLCs
- Owners of an LLC are called members
- If family owned, there may be restrictions on who interest in the business can be sold or transferred to
(?)
Describe key family roles and positions for charitable organizations
- Perhaps utilize a donor advised fund, can make contributions and later decide how to donate money to organizations
(?)
What is Human Capital?
Who are the individuals, the family members
* Talents
* Passions
* Experiences
* Callings
What is Social Capital?
Family member’s civic engagement, community connection and extending care beyond your own family
What is Financial Capital?
Family member’s
* Money and other assets, such as stocks, bonds, real estate, and trusts
* Purpose: a tool to develop and express the other dimensions of life that create lasting and sustainable success
What is Intellectual Capital?
Family member’s
* Knowledge and capacity to learn
* Communications and managing family differences & conflict
What are the necessary elements to conduct a successful family meeting?
- Obtain agreement
- Establish purpose and goals
- Design collaboratively and create expectations
- Clarify expectations and format
- Obtain information and invite participants
- Create a safe environment
Describe Family Governance Models
A family office can provide governance and management
structures that can deal with the complexities of the family’s
wealth transparently, helping the family to avoid future conflicts.
At the same time, confidentiality is ensured under the family
office structure, as wealth management and other advisory
services for the family members are under a single entity owned
by the family (?)
What are the elements of an effective family mission statement?
Every statement should include the values in which your family wants to live their lives by, the family’s goals, and the way in which everyone plans to achieve these goals
Define family’s goals, priorities, values, strengths, weaknesses
When should a single-family office be used?
Useful when the client wants privacy and ultimate cohesion across privacy, security, and wealth preservation. They manage financial affairs of a single family. They will engage in all, or part of the investments, fiduciary trusts, and estate management of a family
When should a multi-family office be used?
If there’s a cultural fit, if they want to minimize involvement and control, if cost is a factor, then MFO may be better. Manages the financial affairs of multiple families, who are not necessarily connected to each other
Several families pool their wealth together and assets are managed under one umbrella
Components of Good Communication
- Discovery-focused interviewing
- Communicating clearly about the process of advising
- Speaking the client’s language
- Listening well, actively and passively
- Managing yourself
Family dynamics who are immigrants to wealth
The experience of transition and transformation
A self created before the wealth
The immigrant experience
Family dynamics who are native to wealth
The life experience of stability
Wealth is present before the self
Native-born citizens
How much wealth is lost from the 1st generation to the 2nd?
70%
How much wealth is lost from the 2nd generation to the 3rd?
90%
Common Characteristics of High Net Worth Families
Most earned their wealth during their lifetime
Look to others and have to learn on their own how to transfer wealth to heirs
Looking to transfer wealth but also values to heirs
Methods for successfully addressing family conflict
Help the family create a setting where family members feel comfortable sharing their feelings about the issues
Discuss what family member’s value, what is working well in the family
Make sure family members in the middle who have good relations with “both sides” act as helpers to show each side that there is more to the story than their own views
How many financial accounts fail to remain with the advisor
when a generational transfer occurs?
90%
What are the causes of wealth transfer failures?
- 60% due to breakdown of communication and trust within the family unit
- 25% due to heirs being inadequately prepared
- 15% due to other causes such as tax considerations, legal issues, mission planning, etc.
What is the Family Systems Theory?
Where the family is viewed as a unit and each family member has a distinct role
They have their own set of rules and behaviors the family operates within
As an advisor, it’s important to know the family roles when you enter into the personal family circle and to know when to accommodate a role and when your own personal biases are showing
What is Connective Listening?
An echo listening attribute that focuses on what the interaction means for others
What is analytical listening?
A type of echo listening that is concerned with what the interaction means to an issue or an objective situation
What is reflective listening?
An echo listening attribute that focuses on how the interaction relates to an individual’s experience
What is conceptual listening?
An echo attribute that is focused on the big picture, big ideas, and abstract thought
Common Components of Discovery-Focused Interviewing
- Door openers
- Open-ended questions
- Clarifying questions
