A family dynasty is defined as a cohesive economic entity where the perpetuation of family wealth, values, and goals spans five or more generations. About 60% of ultra-wealthy families (net worth = US$30 million or more) find the concept of family dynasty appealing.

Interest in creating a family dynasty is strongest among ultra-wealthy families with single-family offices. Nearly three quarters of them think in this direction according to the general management of these single-family offices. As a percentage, founders of single-family offices find the prospect of a family dynasty more appealing. At the same time, two out of five ultra-rich C-level business owners are very interested in the possibility of creating a family dynasty. In these cases, more heirs than founders are seduced by the idea of ​​a family dynasty.

The appeal of a family dynasty

Generation

Single-family office

family affair

Weighted average

Founders

76.4%

32.1%

64.9%

heirs

69.9%

49.1%

58.7%

Weighted average

74.5%

43.3%

61.8%

N = 403 family businesses interviewed; Source: Family Fortunes: How Family Businesses Thrive Across Generations

As the research is based on a global sample, we find that the appeal of family dynasties is broad and widespread. For example…”Working with families from Singapore, China and Korea, who have wealth with their family inside and outside their home country, we find that many of them are interested in the concept and want to know what steps they can possibly take to pass their legacy down through multiple generations,” says Aaron Yen, Senior Partner, Ascendent LLP. “For many of these families, building a family dynasty is a major concern.”

It is important to keep in mind that in family dynasties, ultra-wealthy families share more than financial interests across generations; they also share values ​​and goals. According to Cliff Oberlin, Chairman and CEO of Oberlin Wealth Partners and co-author of Family Fortunes: How Family Businesses Thrive Across Generations“These shared moral standards and goals give family members a strong and ongoing commitment to the family. For a family dynasty to exist, each generation must transfer the family fortune in some form, along with its core belief system, to succeeding generations. Having a well-formulated succession plan is key to achieving both of these goals.

Wealth transfer
A major problem with creating a family dynasty is the ability to maintain or increase family purchasing power across generations. As most families grow and establish multiple branches, the amount of wealth required can eventually increase exponentially. According to Vince Annable, CEO and Founder of VFO Advisory Group and author of The Household Endowment Model: Wealth Planning for Affluent Families, “We find that wealthy families, who think generationally, must first understand what it is going to take to secure the level of wealth they want for their heirs and their heirs of heirs. Producing projections, albeit rudimentary, is generally very useful. Only then can we focus on developing the best investment strategy and determining the optimal ways to potentially reduce current and future taxes. »

Undoubtedly, one of the major obstacles to the creation of family dynasties are inheritance rights. Although it is an obstacle, it is often surmountable. According to Jeb Burton, managing director of law firm Burton, “In order to transfer wealth between generations, we need to think creatively. We will regularly come up with innovative ways for heirs to inherit wealth while mitigating or eliminating inheritance tax. Depending on the jurisdictions involved and the time available for implementation, there are more or fewer tools available. Only after exhausting all possible legal strategies do we close the gaps with life insurance. When it comes to life insurance for very wealthy dynastic oriented families, the best solution is often private placement, as it offers both an estate and income tax solution.

When it comes to leveraging the power of private placement life insurance (PPLI), it’s important to understand that there are different variations. According to Frank Seneco, President of Advanced Life Planning Boutique, Seneco Global Advisors and one of the leading PPLI experts, “There are many benefits to using PPLI by families looking to build and protect their heritage across generations. Some strategies prove to be very effective such as PPLI arbitrage where a basic form of PPLI is used. In addition, certain types of PPLI policies, such as generational PPLIs, may be more specifically suited to families who are taking steps to transfer or even multiply the purchasing power of their estate to their great-great-great-grandchildren and take into account a rapidly increasing number of branches of the family tree.

Transfer of values
As noted, family dynasties do more than just transfer wealth. It is also about transferring values. According to PJ DiNuzzo, Founder and President of DiNuzzo Middle-Market Family Office™ and author of The DiNuzzo “Middle-Market Family Office™” Breakthrough: Creating Strategic Tax, Risky Cash Flow, and Lifestyle Options for Successful Private Business Owners and Affluent Families, “Families can use many tools to help them pass on their values ​​to future generations. Examples of these include family reunions, vision and mission statements, family constitutions, and family banks. What often proves to be very effective is, if the family is a philanthropist, the creation of a private foundation.

Private foundations can help help wealthy families stay together and aligned while benefiting others. “In addition to being great charitable vehicles, private foundations can be used to help ensure that the family stays and works together to make a difference,” says Homer Smith, private wealth advisor and founder of Konvergent Wealth Partners and director of the Integrated Business Owners Solutions team. . “What is usually essential is that the wealthy family be clear about their charitable goals and how they can continue to do good generation after generation. This typically involves involving family members early in the giving process and providing the resources, including educational resources, to help them grow as people and as philanthropists.

Choose the right team
Probably the most critical decision ultra-wealthy families have to make if they want to create a family dynasty is selecting the right professionals. “Too often, the ultra-rich as well as many successful entrepreneurs and great visionaries end up satisfying instead of maximizing when it comes to the professionals they hire,” says Justin Breen, the driving force behind the exclusive BrEpic network and co-author of Superior results: maximize the value of your high-performance multi-family office. “The difference is in the astronomical results when the good professionals are used as opposed to second rate ones. That’s why ultra-wealthy families and everyone else – for that matter – should make the effort to ensure that they are indeed working with the best of the best.

There are certain criteria that ultra-wealthy families interested in creating family dynasties should consider when choosing the professionals to help them. “A key factor is their specialist knowledge and experience of themselves and their teams,” says Anthony Glomski, president and founder of AG Asset Advisory Family Office and author of Liquidity and You: A Personal Guide for Tech and Business Entrepreneurs Approaching an Exit. “Knowing what to do and having experience in establishing a family dynasty is crucial. From helping the wealthy family mitigate taxes on the sale of business assets to making the smartest use of private placement or other strategies to help them structure their domestic and international holdings , it can make all the difference.

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