Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, January 25, 2012

Article on Family Risk Management Policies

AnninoPatricia M. Annino (Attorney, Boston, MA) recently published an article entitled, New Risks for the New Generation: Encouraging Families and Family Owned Businesses to Implement a Family Risk Management Policy, Wealth Strategies Journal (Jan. 17, 2012). An excerpt from the article is below:

Families and family owned businesses have faced risks since this country began. Traditional risks have included the unexpected death or disability of key stakeholders; incomplete or out of date estate planning documents; incomplete or out of date corporate documents; the lack of liquidity; the lack of a disaster plan; the lack of effective communication among key stakeholders; major changes in the competitive environment; the divorce or remarriage of a key stakeholder; out of date business valuations; the absence of an effective family governance policy; and the lack of an awareness of the boundaries between family and business.

In addition to these traditional risks, families and family owned businesses now face new risks, including the lack of privacy in the Google world; cyber attacks; the social media risk to family reputation; global dispersion of family members and its impact on effective communication; new attacks on business valuation; pre-nuptial agreements and post-nuptial agreements; complex alimony calculations for the family business owner (taking phantom income into account); the baby boomer transfer of wealth; the speed of innovation; the impact of the increased working lifespan of the senior generation on succeeding generations; and the very turbulent economic times.

All these risks should be brought to the attention of the family, and a risk management policy statement should be put in place to soften the blow and manage the impact. A family policy statement is an agreed upon guideline that family members have developed amongst themselves in collaboration with the family's most trusted advisors. Following the guidelines of the risk management policy statement will increase the chances that the family can protect and sustain its wealth and preserve family harmony for generations to come.

Key areas "at risk" for family business are Family Cohesiveness, Business Ownership, and Wealth Management.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.


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