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Growing Family with Five Second Generation Siblings

Consider the family with five Second Generation (G2) siblings. Each of the siblings owned shares of the family business and wanted to set up Multigenerational Trusts to pass the shares of the company to future generations. They quickly realized that each G2 sibling could select a different trustee. Each trustee could have a different perspective on the desired performance of the family business, have varying knowledge about the company and/or family, and have a different perspective on their willingness to hold a concentrated asset in the trust. The impact of separate trustees could result in additional distractions to management at the family business as the different trustees may reach out requesting information or questioning management decisions. Instead, the family established a family trust company (FTC) with a Board consisting of Family Branch Representatives as well as two independent, trusted advisors. Each of the five family branches have a seat at the FTC Board table to determine the family’s wealth strategy.

Being a shareholder of the family business as Trustee of trusts holding shares of the family business, the FTC Board votes on the Directors on the Board of the family-owned business. The Board of the family business remains autonomous in its oversight of the family business. The family business remains autonomous in its decisions on management succession planning. The FTC’s involvement in the family business is from a shareholder perspective. Therefore, through establishing an FTC to serve as trustee of the family’s trusts, the family members remain the perpetual shareholder voice in guiding the family business across generations while also supporting the vision and values of the family.

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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