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G1 and his Spouse Sit at the Table with G2

Motivation for setting up the FTC: Promoting Transparency, Education, and Multi-Generational Involvement.

This case study revolves around George, a wealth creator who initiated the formation of an FTC, driven by his realization that his children didn’t understand the wealth strategy and role the family business plays in it. He had two main concerns. First, he wanted to ensure that his children knew the complexities of estate planning as well as the thoughtful planning that had already been done with significant ownership of the family business now in trusts; and second, he hoped the FTC would facilitate a harmonious transition between trusted advisors across generations.

An FTC was established with these features:

  • Its Board convenes four times annually to keep the family engaged in regular dialogue with educational programming planned for every meeting.

  • To foster transparency, education, and multi-generational involvement, George, his wife, and their two children serve on the FTC Board and committees. There are also two Independent Directors on the Board—one Independent Director is a long-time advisor to George. The other Independent Director was interviewed and selected as a new advisor—younger and closer to G2s’ age. George’s thought process for bringing in a new advisor was to ensure the new Independent Director would have the opportunity to “sit at the table” with him and his wife to understand firsthand their values and intentions for the family wealth. Since the new advisor is also closer in age to the G2s, George hopes his children will be more comfortable reaching out to him versus their parents’ advisor. Institutional knowledge is preserved, but no knowledge is being developed to carry across to the next generation.

  • The FTC’s Education Committee, composed of G2 and the new Independent Director, chose the education programming focus to meet their needs.

  • Because the FTC is not currently overseeing any charitable trusts, the family decided to use the Philanthropy Committee as a formalized forum for discussions on how to align family philanthropic ideas so that they can identify potential areas of family charitable involvement. The committee, comprised of only family members, gathers after each FTC Board meeting.

  • George took a unique approach to the formation of the Family Business Asset Committee. He isn’t ready to place voting shares of the family business in an irrevocable trust until he and his wife have passed, so the composition of the Family Business Asset Committee is cross-referenced in the FTC’s governing documents and his revocable estate plan. This allows George to balance his desire to maintain control during his lifetime and name the members of the Family Business Asset Committee, ensuring a seamless transition of governance for the family business at the right time.

  • The FTC governing documents also contemplate spouses serving on the Board and FTC committees. After much deliberation, the FTC governing documents provide that spouses may serve on the FTC Board and committees after being married for 15 years to a lineal descendent. This requirement aligns with the family’s value of emphasizing the importance of long-term commitment to family involvement.

This case demonstrates how an FTC can serve the family well today by enhancing cohesion and education while also establishing a seamless governance transition across generations.

The information provided is general in nature and is not a testimonial or endorsement by any existing or potential client. No compensation was provided directly or indirectly for use of the information. The information provided is generalized based on hypothetical backgrounds that led to the approach discussed.

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