Family and wealth are a complicated combination. Although wealth helps a family to have a better quality of life, realize shared visions and achieve more significant aspects of life, it can also lead to rifts and certain resentments. It may result in financial problems in a family, which will be a difficult phase.

In addition to that, when a wealthy family grows and expands, keeping themselves and the shared capital together can be quite a tricky task. A family’s wealth can also be at risk when there are certain facets, such as multigenerational trust issues. Furthermore, if some family members take legal actions, it can lead to disharmony in a family and jeopardize the family’s wealth.

A written family constitution is crucial to avoid similar situations and lead a harmonious family life and better wealth. In addition, it’s also one of the essential facets of having a structural capital which helps in a balanced wealth of a family.

Often people get confused when trying to prepare a family constitution. Professional help can be highly beneficial in such cases. Hauberk Capital knows how to assist you with proper planning through a family constitution. However, before further discussion, you need to know what a family constitution means. Let’s get to it.

What is a Family Constitution?

If a family has a formal family constitution, they are steps closer to gaining structural capital. It’s a written agreement that governs how different family members will participate in the task of managing family wealth. It has exceptional benefits when it comes to citing family wealth.

In addition, it helps different family members to understand their roles, where they stand and what actions they can take in the family.

James E. Hughes JR., in his book, “Family Wealth: Keeping It in the Family”, states, “To successfully preserve its wealth, a family must agree to create a system of representative governance through which it actively practices its values.” Now, that system of representative governance is possible through a family constitution.

When a family makes decisions based on that governance, they make intellectual and good decisions together. A formal family constitution includes:

● How members use the resources

● What are the responsibilities of different members

● Basic rules for family participation or income

● What are the limitations on spending, investing and donating wealth

● Who makes financial decisions

● How can family members prepare to manage family wealth and preserve family values altogether

All of the mentioned points in a family constitution help cite family wealth. At Hauberk Capital, we know how crucial these points are. We focus on evaluating your financial condition, determining your objectives and the associated risks, and preparing a strategic plan to prepare a family constitution successfully.

How does a Family Constitution Help with Citing Family Wealth?

A family constitution is like a living document that keeps getting modified as and when the family circumstances evolve. That’s why professional help can ensure that there are no issues with your family constitution. There are several ways through which it helps in citing family wealth.

Some of the main reasons why the family constitution efficiently does it include:

Lays the groundwork for tough decisions

To ensure having good wealth, family members have to make difficult decisions. In family business decisions, members have to consider all the complex family and personal relations. Having a groundwork for depending on when it comes to the decision-making process can make the task easier for families. Furthermore, this helps them to make better decisions when it comes to wealth management. Our wealth advisory programs can be helpful when it comes to effective wealth management.

Creates ethical guidelines

The family constitution binds family members by moral force. It lays out preferences on which family member has what role in financial decision-making and capital usage. It also enhances the communication processes among family members. Creating proper guidelines is crucial, and that’s where a financial advisor can help you prepare appropriate guidelines. It can help you with making effective decisions.

Cohesiveness and trust

When a family constitution is created, ideas and opinions are shared. It represents an internal agreement, which leads to harmonious future processes. Families come to a consensus on ideas and topics that are crucial for them. It helps in building up trust and cohesiveness among each other.

Reason to care for wealth success

The processes noted down through a family constitution engage family members across multiple generations. Hence, it enables members to focus on the family’s continued success and leads to better wealth management.

Conclusion

Hence, we can say that a family constitution helps families prepare for unexpected situations and establish unity and roles. When each family member has a role in wealth management, it automatically becomes better and reduces the chances of a financial crisis.

Family Constitution Efficiency on Citing Family Wealth