Navigating family difficulties is overwhelming for anyone. Where significant wealth is added to the mix, an added layer of complexity is introduced, especially for affluent individuals, wealthy patriarchs and matriarchs who have amassed significant wealth over the years. It is not uncommon for family dynamics, conflicts, or unforeseen events to emerge, posing a threat to the preservation of these diligently acquired assets. However, there exist various strategies that can be explored to effectively maneuvre through these complexities and successfully overcome family challenges while safeguarding family wealth. 

An important starting point is to understand the root of the challenge and their root cause. Family difficulties can arise from a wide range of circumstances, such as divorce, disagreements regarding inheritance, substance abuse, feuds, or even financial mismanagement. It is crucial to first identify and acknowledge the specific challenges being faced within the family in order to develop a tailored approach to preserving the family wealth.

Now, one of the essential aspects of navigating family difficulties is having open and honest communication. Family members should be encouraged to express their concerns, opinions, and desires in a civilised and respectful manner. As a matter of fact, mutually beneficial solutions can be reached by fostering open communication through the difficulties that might arise. A possible way to encourage meaningful communication would be to create a structure that is respected and upheld by the family. One of such structures would be in establishing a family governance system. A family governance structure is an organised system that helps a family manage and make decisions regarding family wealth, assets, values, and relationships. It establishes guidelines and processes for communication, decision-making, succession planning, resolving conflicts within the family and provides for periodic family meetings. These regular family meetings can provide a platform for discussing issues and addressing concerns in a structured and productive manner. An expert or family wealth adviser is in the best position to create a structure that would be best suitable for any family. 

It is crucial to also establish a clear line of succession to ensure the smooth transition of wealth to future generations and minimise potential conflicts. The family patriarch or matriarch can explore developing a comprehensive estate plan that outlines the distribution of assets, responsibilities, such as managing family businesses or foundations, and decision-making processes in relation to the family’s wealth.

Without a pre-determined plan in place, the transfer of assets and decision-making responsibilities can be subject to disputes, disagreements, and even legal battles among family members, which can ultimately lead to the erosion of wealth and strained relationships.

Working closely with experienced estate planning attorneys and financial advisers can help design a robust succession strategy that protects your wealth. To ensure the effectiveness and legality of the estate plan, it is highly recommended as mentioned earlier, to engage an experienced family wealth adviser to guide the family in creating a robust succession strategy that reflects the family’s specific goals and ensures the protection of the family wealth.

Furthermore, it is important to encourage financial literacy and education within the family. An effective way to preserve wealth through difficult times is to focus on the next generation, teaching them about wealth management, investments, and the family business. By equipping family members and the next generation with the knowledge and skills to handle money responsibly, they are empowered to preserve and grow the family’s wealth effectively.

Also, legal challenges can arise during periods of family difficulty, especially regarding property division, prenuptial agreements, or disputes over trust funds. For example, property division can become a significant legal concern when a couple decides to separate or divorce. In such situations, determining how assets such as real estate, investments, or businesses should be divided can be a source of conflict.

Now, if one party feels entitled to a specific property or believes they have contributed more to its acquisition or maintenance, legal battles may arise. Addressing these issues head-on, through legal channels, can offer a fair and conclusive solution that prevents extended disputes and ensures the preservation of family wealth.

To preserve family wealth effectively, it is crucial to confront potential legal issues directly. By seeking legal counsel, families can navigate complex legal frameworks and protect their assets. Timely intervention helps prevent prolonged litigations, preserves family relationships, and ensures that the family’s wealth is managed and distributed according to their intentions. 

Moreso, family conflicts can be emotionally and financially draining, potentially destabilising wealth preservation efforts. It is advisable to seek personal and professional support such as professional mediators or family therapists to help to manage the emotional and practical challenges that may arise. These experts can also provide guidance on improving relationships, conflict resolution, and managing family dynamics.

In addition, reserving wealth during family difficulties requires a well-diversified investment portfolio. The family patriarch or matriarch should consider spreading investments across different asset classes and geographical regions to mitigate potential risks. Seek professional guidance from experienced family wealth managers who can help strategise and tailor investment portfolios based on the family risk appetite and financial objectives.

Lastly, the importance of philanthropy and family legacy should be utilised as a tool for maintaining family unity and shared values. By involving family members in philanthropic endeavours, collaboration is encouraged, a sense of purpose, and a common goal. Establishing a family foundation or charitable trust can help perpetuate the family’s values while making a positive impact on society.

Preserving wealth through family difficulties may seem like a daunting task, but with the right mindset, strategy, and support, it is possible to navigate these challenges successfully.

By fostering open communication, establishing clear lines of succession, encouraging financial literacy, addressing potential legal issues, and seeking professional guidance, a family can ensure the long-term preservation of the family wealth while maintaining family harmony.

Remember, family difficulties are an opportunity for growth and strengthening bonds, ultimately safeguarding the family legacy for future generations.

Adejumo is a wealth adviser at the Meristem Family Office.