The growth and preservation of wealth are arguably one of every family office’s key priorities. While the focus has predominantly been on wealth and asset management and strategy, in recent years, this has shifted to encompass more personal considerations like next-generation engagement and succession planning. What many ultra-high-net-worth families fail to plan for adequately, however, is welcoming a new spouse to the family. This is of particular importance when spouses often play major roles in both the daily business but also when it comes to key events like succession.
While most of us like to regard marriage as a permanent commitment, rising divorce rates and increasing numbers of blended families are a constant reminder that this isn’t always the case. For families whose objective is for wealth to remain within the family from one generation to the next, it is an important topic, but also one that needs to be handled with the utmost care.
Preparing for future spouses should start early
Most families only really consider what the addition of a new spouse will mean for the family when engagements are proposed. However, like succession planning, this should be anticipated and planned for years before it becomes a reality. It could even form part of these plans and may include many of the same business, legal and family dynamics consultants.
Educating for happily ever after
For children to truly grasp the extent of their family’s wealth, they must be taught and involved in various aspects of financial planning early on. This can begin as casual discussions and as they come of age, transform into hands-on experience through access to information and meetings with financial advisors.
Not only does this foster engagement, but it also establishes their role as custodians of the family values and legacy, which instills a sense of responsibility towards these as well as the future generations.
With this foundation firmly in place, as young adults, it is also far easier for them to understand the weight of their parents’ concerns for both their finances and family. A fact that can help to smooth tensions when it comes to discussing issues like prenuptial agreements, setting up trusts and the role their future spouse and children will play in the family and its business.
It also sets the tone for these difficult discussions, making them feel like a natural progression of life and business more than petty parental concern that seeks to prioritize finances over love and alienate their future spouse from the outset.
With this approach in place, it is also far easier for future heirs to openly discuss these issues with significant others whom they deem fit to be their prospective life partners. This can take place naturally as these relationships evolve rather than being sprung on them by third parties when they’re about to be formalized.
The global family
As the world moves towards greater globalization, many family offices are expanding across borders and so too are the families who run them. Children often educated or start their careers abroad, with many opting to reside in these countries permanently or move to new ones with their spouses.
While most family offices are adept at navigating the legal and tax implications of international business expansion, some may be decidedly less prepared for the transformation of the family into broadly multi-cultural and multi-jurisdictional systems.
Not only does this require developing cultural sensitivity and intelligence that will make a future spouse feel welcome, but it also necessitates a great deal of sensitive yet vital planning. The possibility that things won’t always unfold as smoothly as planned is a real one. With it comes a host of legal complexities that can have staggering financial implications if not planned for and executed correctly.
It is essential to ensure that contracts put in place to facilitate wealth preservation when it comes to marriages and trusts are designed to be upheld in the jurisdiction in which they would be executed and cannot be challenged or nullified in others. When such issues may arise, involving all parties as well as professionals versed in these complex issues is essential.
When things get serious, communication is key
It may be uncomfortable even to imagine talking to a child’s significant other and potential future spouse about financial matters, which are usually a topic of the utmost discretion. However, when handled with care and built on mutual trust and respect, something that should be cultivated years before such events even transpire, these discussions are ultimately to everyone’s benefit.
Spouses may come from all walks of life; some may be from equally powerful and wealthy backgrounds as the families they’re marrying into, others may not. Regardless of their financial standings, a future spouse will need to be made aware of the magnitude of wealth that they are entering into as well as the family’s values, objectives and policies concerning it. Likewise, prenups should be discussed openly as should the necessity for marital, tax and estate planning.
Open communication not only helps to encourage the couple to identify potential issues that may arise and put plans in place for them but also help them to formulate strategies on how to proceed in instances where agreements need to be altered as circumstances change.
Preparing the future spouse for their role within the family
Prenuptial agreements aside, spouses entering into wealthy families and potentially their business affairs need to be made aware of might be expected from them. This should be based on a clearly defined family consensus to avoid misunderstandings and future issues.
Spouses should be made aware of whether they will be entitled to ownership shares, be the beneficiaries of family trusts, or if they can look forward to both of these in the future. When an agreement is reached, they should be specifically educated for these roles and those that they will grow into as part of the greater succession plan.
There are many complex considerations facing families when welcoming a new member into their fold. When planned for well in advance, approached openly and executed in a spirit of mutual trust and respect, this potentially turbulent process can be successfully navigated to the benefit of all involved.