The results are in and the UK is all signed up for five years of majority rule. Despite last week’s election returning a surprise government, politicians and pundits across the UK had spent the weeks leading up to 7 May predicting likely alliances for a second coalition.
Coalitions aren’t just for politics, of course. Consider whether confidence in your family’s affairs and succession planning could actually be bolstered by an intergenerational coalition. Should the patriarch or matriarch rule as a single party or can consensual politics play a part in family affairs?
For many families, the preservation of their wealth will be a key concern. Although formal lifetime and testamentary succession planning can be used to great effect to ensure that wealth is not unnecessarily diminished as it passes down the generations, arguably the key to long-term preservation is a cohesive approach.
A family governance structure can provide a valuable framework for making decisions, airing grievances and handing financial knowledge on, much as a corporate governance structure creates checks and balances at all levels.
Ideally, the structure would be embodied in the form of a family charter or constitution, a set of non-legally binding ‘family rules’ giving a picture of the family assets in broad terms, setting out the guidelines by which a family has agreed to make decisions and aligning family members towards a shared vision for the family’s wealth.
Often, it is as much the process of agreeing the content of a family constitution that creates awareness and consensus among the family as the existence of the document itself. Many families will debate key elements of the constitution (such as preferred mechanisms for passing on wealth, the policy in relation to entrepreneurial activity or philanthropic matters, or even procedures on how conflict between family members should be resolved) and record the agreed positions in the constitution.
Older or more financially astute members of the family may wish to take the opportunity to share their experience in the conduct of their financial affairs. For example, an expectation that pre-nuptial agreements will be entered into could be agreed and recorded in the constitution. Pre-nuptial agreements can be a particularly emotive subject as they may be perceived as a personal attack on a prospective spouse; having an established family practice in place before individual relationships are formed can help to defuse these situations.
After the production of the agreed family constitution, it would be beneficial for families to schedule regular family meetings to provide a continuing forum for the interests and concerns of the family to be discussed and to allow the constitution to evolve.
Some families may even establish a ‘family council’ comprising family members and advisers or trusted associates to act as a lynchpin, consult with the wider family and make recommendations on the family wealth and outlook.
Of course, consensus on all fronts will not always be possible, but creating a structure of rules and an environment in which the family’s core values can be acknowledged and developed is invaluable. Where wealth preservation is key, families need a collaborative approach to succession planning to ensure lasting cross-party allegiance.
Rebecca Waterhouse works at boutique private wealth law firm Maurice Turnor Gardner LLP