- April 23, 2020
- Posted by: Matt Wesley, Founder, The Wesley Group
- Category: Culture, Estate Planning, White Paper
Author: Matt Wesley
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Wealthy families are different from ordinary families in at least one very particular way. It is not so much about lifestyle (though that can be an obvious part of it). The biggest difference has to do with the daily realities of living life in relationship to the mechanisms of accumulated capital. Lifestyle choices are only one aspect of that reality.
When substantial wealth is accumulated, it comes with a whole series of structures designed to protect the pool of gathered capital. These structures consist most often of trusts, corporate entities, governance mechanisms, interlocking accounts, legal agreements and charitable organizations. Every family of wealth has its unique configuration of these entities and structures designed to accomplish the general goal of preserving capital. The more particular goals are to preserve capital in ways consistent with the sources of the wealth, the intention, and desires of the founding generation, and the management of that capital within the ambit of the family system. If one takes a snapshot of this complex of legal and financial structures at the death of the wealth creator, one could consider that inherited structure as a “surrogate” for the authority and power that previously resided in the wealth creator. (See, Marcus, 1992.) The law (as applied through this complicated surrogate) has taken the place of the founders who are now deceased. The state’s legal infrastructure is now acting in loco parentis for the absent founders and is casting a long shadow on the individuals within the family. Living with this surrogate and in its shadow is the fundamental hallmark of wealthy families. How they live in that shadow – in matters of lifestyle, individual choice, and family culture – is the outworking of the impact of accumulated capital in the life of the family.
When the legacy of accumulated capital passes to the heirs, the bare surrogate of the legal structure begins to take shape in its operation – its administration becomes clear, and the family dynamics around it emerge and congeal into stubborn patterns. The formal surrogate that existed at death emerges over time as a functioning formation. (Id.) Official fiduciaries take on their duties. Family leadership begins to arise. Most importantly, members of the family now organize and orient themselves individually and collectively around this “surrogate” of patrimonial legacy as a “formation” and come to define fiduciary and leadership roles within the family. Individually, the surrogate must be integrated into the psychology of each family member. Collectively, there arises a family culture informed by and affecting the formation. This formation becomes a central fact in the life of the wealthy family. And so, it is the adoption of this formation – and its consequent impact on the family – that is the central reality of wealthy families. They live their family life in the shadow of legal entities that control capital. This all may seem obvious when laid out, but sometimes insight arises from taking a look at basic realities in a different way.
The formation functions as a core reality in the family of wealth until its endgame. That endgame seems, generally to follow one of three patterns.