As I have discussed in previous columns, including my last on creating a family story, heritage planning seeks to fill in the gap in a family’s traditional financial and estate planning.  One of the key components of heritage planning is the creation of a Heritage Statement, which is a unique declaration of love and lasting value shared by one generation of a family with another. 

A Heritage Statement is a critical document in a family’s history.  The Heritage Statement shares a client’s story, explains a client’s values and articulates clients’ deepest hopes and dreams for the future of their famiies.  It also typically serves the critical function of introducing the concept of family governance, while also shepherding in a new paradigm of interaction for the family internally. In addition, the Heritage Statement will help to create clarity for the client’s team of professional advisors. 

A Heritage Statement is also an invitation: it invites every member of the family to participate in the building of a unified, lasting structure.  This is no small task.  Studies have demonstrated the fact that building and enhancing trust and facilitating effective communication within the family are foundational keys to family success.  

Instilling these elements in a group can be challenging.  Effective communication within the family must be adult-to-adult.  The keys to achieving this have come to be known as the “3 Ps,” as explained by Buchholz and Roth in their book, Creating the High-Performance Team. The 3 Ps are: 

  • Permission. All individual family members need to be given permission to assert themselves and take the first step. 
  • Protection. All family members also need to feel safe in asserting themselves. 
  • Potency. All family members also need to feel that what they contribute will make a difference.

Find a family that has remained unified and strong for generations, and you will find a family with a clearly defined shared vision.  A united family is created by establishing common bonds of family history and family experience.  In the heritage planning process, great significance is given to the development of the vision and to the way it is expressed and shared with the family.  

The Heritage Statement communicates the values, stories, history, life lessons, experiences, hopes and dreams of the generation that creates it.  The vision promoted in the document is often revisited by future generations as a reference point for both financial and non-financial decisions, and the family’s Heritage Statement is updated to include additions to the family story and life lessons. 

The natural vehicle for the expression and exploration of this vision and the values that have informed it is a formalized family structure that enables a passing of the torch from one generation to another.  To many the term “family governance” sounds formal, complex and even inconsistent with what a family is supposed to be.  However, family governance at its most basic level is merely the process by which a family makes decisions as a group.

This might be the most misunderstood and most feared element of heritage planning. For some patriarchs and matriarchs, the mere words “leadership transfer” suggest loss of control, influence and decision-making authority. Yet the process by which leadership skills are developed and transferred is the cornerstone of the successful multi-generational family. 

Each family member must decide to participate for his or her own reasons.  Ultimately each family member who decides to participate in the family governance process makes their decision to stay the course based upon two factors: 

  • Is it worth it?
  • Can I do it? 

It will be worthwhile for everyone to participate if the family establishes a governance structure in which:

  • Each voice within the family is valued; and
  • Each individual finds a meaningful and productive outlet within the governance structure for their core passions. 

The heritage statement also institutes a new level of true collaboration between the client and their professional advisors, as well as between those various advisors themselves.  Preparing and implementing all of the various plans, products, services, and the ongoing review and adjustment of the family’s unique plan will not be accomplished by a single individual.  Instead, a team of professionals from different disciplines will take on these tasks.  That team, with expertise in fields ranging from accounting and law to investing and insurance, is an integral part of not just this planning, but in a very real sense an integral part of the client’s life. 

One of the hallmarks of good heritage planning is the selection of the right advisors who will work as a fully collaborative team on behalf of the client.  This element is critical for effectively sustaining wealth and unity from generation to generation.  Sadly, effective and interdependent team collaboration of this kind is still a rare occurrence in the planning world.  Communication between financial, legal and other professionals during the planning and implementation of most plans is typically achieved via e-mail, fax, phone and brief face-to-face meetings. 

This is not collaborative teamwork.  A fully collaborative team works together creatively, considers all of the alternatives available, and agrees together on the recommendations that are made to the client.  After the client has decided on a course of action, that collaborative team of advisors then goes to work together to implement, continually review and provide for the administration and compliance needs to ensure that the plan really achieves the outcomes that the client desires.  It is entirely appropriate for a client to expect this level of service. 

A grocery bag filled with the most expensive ingredients does not magically transform itself into a memorable meal when it is set on the kitchen counter.  It is the same with the various elements we have identified as the required ingredients for successfully sustaining wealth and unity from one generation to the next. 

In my next column I will touch upon how heritage planning is implemented in the first year and beyond.