Top 3 Priorities in Preparing Your Family Office for Divorce
Updated: May 16, 2022
For many, substantial wealth and its responsibilities can feel like a burden, especially if you were not the creator of the wealth and were never the primary decision maker. Divorce can force you into an unfamiliar and uncomfortable role. You may feel unequipped to deal with the new leadership position and fear potential mistakes. On top of this, divorce by itself can feel stressful, complicated, heart-breaking, and more. With so many emotions and decisions at hand, it’s understandable if your decision-making skills aren’t fully intact. Add in the onus that may come with wealth, and the process can start to feel overwhelming.
The Family Office is a Business
Make no mistake about it, a family office is a business. Well-functioning ones have mission statements, defined priorities, governance policies, etc. Many are also designed with future generations in mind. Moreover, we’ve all heard the stats before, and know that there’s a high failure rate for successfully passing wealth to future generations. Looking at the family office from a slightly different perspective, that of a family business, the numbers reinforce this disheartening story.
In transferring a family-owned business to the next generation:
55% don’t survive past the owner’s death;
30% survive into the second generation;
12% survive into the third generation; and
3% survive into the fourth generation. (1)
Facing your new reality, where to start?
You want a successful transition, but your head may be awash in sorting out estate planning, tax impacts, business structure, the people you want involved, location, and the cost. The list of things to think through and decisions to be made may feel endless. It takes time and significant planning to do it right. The good news is that this is in your favor, as the divorce process for the highly successful can take many months, if not years to complete. We recommend taking it one step at a time, breaking the decisions down into smaller, more manageable pieces.
We offer 3 priorities of where to start:
Wealth does not have to be a burden, even if this is your current belief. Flip your perspective and try to think about what lies ahead as an opportunity. The chances are, even if you weren’t the primary decision maker, you weren’t fully satisfied with the functioning of your family office. You likely have ideas and things you would like to see changed, which can lead to significant improvements.
Focus on your values. What’s most important to you in life? Try to make a list of 3 to 7 core values. This can be a very powerful exercise that helps to guide decisions for you, your family, and your team. Perhaps this wasn’t formalized before. Writing it down is an opportunity to make your new family office even more successful than the last one. MacKenzie Scott is a good example - her philanthropic endeavors have shone brightly since her divorce with Jeff Bezos.
3. Seek out help
A second set of eyes is invaluable. Bounce your ideas off those who have been there before and have your best interest at heart. There are too many decisions to go it alone. In addition to the legal side, seek out advice from trusted sources with experience in divorce, personal finance, investing, and family offices.
With an improved perspective on divorce, you may begin to see the benefits that your new family office can bring, including the opportunity for more impact, greater happiness, and increased freedom. We are here to guide you through this process.
(1) “Business, Succession Planning for Private Companies: Creating Exit Options Comes From Early Planning and Creating Value,” Quist Insights, 2015. Accessed 7/5/21. https://www.quistvaluation.com/wp-content/uploads/2015/08/Quist-Insights-Business-Succession-Planning-for-Private-Companies.pdf
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