Prepare a Nice Dinner, Break Out the Wine
As this story begins, I am the trust officer, and the grantors, husband and wife, are in their late forties. Theirs is first-generation wealth of about $100 million. They have three children — son 22, and two daughters, aged 19 and 17. The grantors are being very thoughtful about how to introduce their children to issues related to their family’s wealth.
The husband calls one day and requests a review of the family manifesto. He sends me what must be 15 pages talking about his family’s values, his views about America and free enterprise. I am quite taken by the manifesto's thoroughness and thoughtfulness.
It’s also clear that he alone has written this. Rather than being a values statement produced “bottom-up” by the family, it's a “top-down” values statement. He is being paternal, saying now hear this.
I meet with him and his wife over breakfast to discuss the manifesto. He wants me to play devil’s advocate, so I raise questions, starting with his assertion that children must have prenuptial agreements before marriage.
I contend that it is important to talk to children about prenuptial agreements before they announce that they are engaged. Insisting upon a prenuptial agreement after a child has announced that he or she is engaged will be interpreted in only one way: “My parents don’t like my fiancée.”
And so I inquire: “Are either of the children close to getting engaged?”
The question has touched a hot button. Husband and wife look at each other and she says, “Well, my son…” and he adds that “yeah, he…” Then comes this awkward silence punctuated by these half-completed thoughts. And finally the husband explains: “Well, our son has this long-term relationship...”
The son's relationship is with a girl from a family whose values are very different from those expressed in the manifesto. We talk a little bit about how to discuss this with the children and perhaps whittle the manifesto a bit to reflect what he would actually say to them.
They decide to have the conversation at their lake home — the most relaxing setting for the family and where they tend to have their best conversations. When the day comes, they prepare a lovely dinner; open a bottle of wine; sit down around the dining-room table — and introduce this subject. They speak about the importance of prenuptial agreements.
And then Dad and Mom put all the cards on the table. “Here’s how much we’re worth and here are the steps we’re taking. We’re assembling a team” — etc. To their surprise, their kids already know roughly how much the family is worth. And how did they find out? They had Googled their father and found holdings that were reported in 10-Ks.
The conversation goes surprisingly well. The kids know their father quite well and probably didn’t expect this family meeting to be a democratic exercise. And they are fine with that.
After the family meeting, the son comes to me saying he wants to learn about prenuptials. Here is a chance to be his counselor. And so we do a tutorial.
Later on, their father says the neatest thing: “Our son needed to hear about prenuptial agreements for himself, and then make his own judgment.” This is what you hope happens: The relationship is strong enough, and the counsel wise enough, that parents entrust their children with responsibilities and let them make informed judgments.
What are the themes to take from this story? One is a generational theme. These parents, today in their mid-fifties, approach their wealth and talk about their wealth very differently from how their own parents would have. And even though Dad remains very paternal, he is open to counsel and recognizes that if the children are going to grow and become mature wealth-owners themselves, they’ve got to play a role in the process.
And there are various ways to get at the values issue. One of them is the approach where Dad or Mom delivers the family manifesto. In this family, it has worked well to help shape estate-planning decisions. It also has helped to engage the kids in thoughtful management of their own.
A final theme: Family manifestos or mission statements aren’t legally relevant to how we, as trustee, interpret trust instruments, except where some part of the manifesto or mission statement helps to reduce ambiguity in that trust agreement. In truth, when we have them — and we don’t see them that often — we do read them for how they'll supplement our understanding of the family, its values, and the role that wealth is playing. They do inform our broader judgment.
From Dad’s paternalistic manifesto to children’s informed judgment in the span of a handful of years — I don’t think the trust business gets any better than that.