ENTR 6300 Family Business Mgmt FWTP Chap 1 DAC Edit

ENTR 6300 Family Business Mangement:

ENTR 6300 Family Business Mangement Family Wealth Transition Planning Chapter 1 Family Wealth Continuity

Business Family Definitions:

Business Family Definitions One or more Family Members Hold significant wealth in operating business that family owners have an ownership stake Participate in operational capacity

Definition of Success Family Wealth Continuity:

Definition of Success Family Wealth Continuity Focus on technical aspects vs. defining productivity and success Professionals focus on technical transactional side Wills Naming Successor Creating other entities

Definition of Success Family Wealth Continuity:

Definition of Success Family Wealth Continuity The family has ability to AND willingness to make Human Capital Social Capital Financial Capital Available at the right stage and in the right way

Definition of Success Family Wealth Continuity:

Definition of Success Family Wealth Continuity Three Pillars of Family Wealth Continuity Health Family Relationships Responsible Stewardship Ongoing creation of Family Legacy Case

Health Family Relationships:

Health Family Relationships Family = “Group which possesses and implements an irrational commitment to the well being of it’s members” Triangles Core is Parents and Siblings Healthy Unhealthy Good Business Decision Assets in Trust – Advantage tax savings Assets in Trust – Disadvantage loss of trust Case

Health Family Relationships:

Health Family Relationships Triangles Case Sibling Mother Father

Health Family Relationships:

Health Family Relationships Shared responsibility Good Communications Respect for privacy (no Enmeshment) Ability seek help in problem solving Teach and know right from wrong Case

Stewardship:

Stewardship Responsible Administration Supervision Management Resource Uses FAMILY Emotion Security Inward Focus BUSINESS Task Oriented Productivity Outward Focused Ownership Creates The Plan Vision Future Growth Case

Interlocking Systems:

10 Interlocking Systems FAMILY Emotion Security Fun Inward Focus BUSINESS Task Oriented Productivity Outward Focused Ownership Creates The Plan Vision Future Growth

Creation of Family Legacy:

Creation of Family Legacy Meaning of family membership Responsibilities to Self Family Community Case

Creation of Family Legacy:

Creation of Family Legacy Can be financial Assets Symbolic Family Values Memories Community Ties Case

Critical Characteristics FWTP:

Critical Characteristics FWTP Many components and connections Open system System has memory System has sub-systems Uncertain boundaries Emergent, Feedback loops System is adaptive People can create changes to adapt Situational Awareness Case Case

Critical Characteristics FWTP:

Critical Characteristics FWTP Uncertain boundaries System is adaptive Keep doing what you are doing and you will keep getting what you got! Business should support family growth May not be safe business over each generation Case Case

Methodology FWTP:

Methodology FWTP Role Advisor Components, connections Cycles of Change Patterns of wealth behavior External forces Understand Wealth System Create & Implement Instruments Role Clarity Case Wealth Transition Structures Governance Role Clarity & Development

Trigger Events to Anticpate:

Trigger Events to Anticpate Trigger Events Death Divorce Childbirth Seems to be sudden Anticipate Trigger Events and determine impact on Wealth System Family Capacity & Constraints in meeting change Structures to deal with change Understand Wealth System Case

Step 3 Four Fundamental Questions Pg 15:

Step 3 Four Fundamental Questions Pg 15 What kinds of wealth are being transferred? From and to whom will wealth be transferred? Will it pass outside of the family? When will transition occur? Now, later, gradually, suddenly? How will each transition occur? Gift, Sale, Both Conditions imposed on transfer? How will wealth be shared amongst recipients?

Our Focus Methodology FWTP:

Our Focus Methodology FWTP Role Advisor Components, connections Cycles of Change Patterns of wealth behavior External forces Understand Wealth System Create & Implement Instruments Role Clarity Wealth Transition Structures Governance Role Clarity & Development

Difficulty in Planning for Business Families Pg 18:

Difficulty in Planning for Business Families Pg 18 All eggs in one basket Difficult Cash Out Wealth is best when shared Business vulnerable to business cycles AND cycles of change in family Successor have different involvement than prior generation

Difficulty in Planning for Business Families Pg 18:

Difficulty in Planning for Business Families Pg 18 Transferees often unprepared for new roles Transferors difficult to let go Mix Business & Personal. Use business to attain personal objectives Dual Identity Lack of Stewardship Business is family legacy Business is surrogate for family

Hernandez Family:

Hernandez Family Name

Thought Questions Chapter 1:

Thought Questions Chapter 1 Do your client families tend to speak of “ownership” of their financial assets or “stewardship” of wealth ? Do they give a sense of what responsibilities accompany wealth? What opportunities? Does this family seem to have, or value, healthy family relationships? What examples have they given of their family relationships? Does this family seem to have a legacy? What is it? Do they seem to desire a legacy? How do the family’s stated goals fit within each of the three goals of family wealth continuity? Are they easily reconciled or aligned with these goals? If not, what seems to be the difficulty – at least at this initial stage? From a bird’s-eye-view, what are the family wealth continuity challenges of this family?

ENTR 6300 Family Business Mangement:

ENTR 6300 Family Business Mangement Family Wealth Transition Planning Chapter 1 Family Wealth Continuity