This article is a companion to Estate Planning Includes Preparing Your Heirs.

A family mission statement is a combined, unified expression from all family members of what your family is all about – what it is you really want to do and be – and the principles you choose to govern your family life. – Stephen Covey, author of The 7 Habits of Highly Effective Families.

Family Wealth Mission Statement
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A family wealth mission statement (FWMS) is a relatively brief statement that encapsulates your family’s purpose, goals and standards. Ideally, all members of the family should have a hand in articulating these values and agree to live by them. Having a shared vision – a shared sense of values and purpose – bonds parents and children together. It serves as a guide for parenting decisions and provides your heirs clear ideals to strive for and guidance in making choices.

An FWMS also articulates the standards by which each member of the family can evaluate each other’s behavior, and children and parents will ideally check on and encourage one another as they make their way down this agreed-upon path. Another benefit of an FWMS is that it provides a sense of meaning and identity, giving heirs the feeling of being part of something important and special.

Other benefits include:

  • The document will articulate why you decided to create a family mission statement, its purpose and why you are choosing to manage and distribute your estate in this manner. It might include such topics as how the wealth was achieved, the life experiences that have shaped your financial philosophy, what the wealth means to you (how it is important to you) and the values you wish to pass on to future generations.
  • The process of creating an FWMS and its accompanying plan (defining the specific actions to be taken) can help donors’ family members identify and examine the people and entities they hold in the highest esteem, leading them, either as first-generation donors or on a deeper generational basis, to make wealth transfer decisions that make the most sense to them. As a clear expression for heirs and others, the FWMS is a tool to pass on personal values to future generations. The accompanying plan can identify the charities or organizations you feel passionate about and want to support with your social capital, as well as the individuals for whom you feel responsible and why you feel an obligation to give them a portion of your wealth.
  • Both the FWMS and the accompanying plan should succinctly inform all advisors (including financial advisors, accountants and lawyers) of the client’s intentions, saving both time and money as they explore appropriate strategies to help clients implement their wishes. Thus, the plan should specifically identify how much money you need during your lifetime and how much you wish to leave to your heirs. It should also identify why you feel this is an appropriate amount and what you want to achieve by giving them this money.

The FWMS document and plan should be signed and dated to demonstrate that it is a valid document and accurately reflects your wishes. And finally, to make sure that it remains relevant and continues to reflect the values of your evolving family, revisiting it annually is a valuable role in preserving its essence.

Larry Swedroe is the director of research for the BAM Alliance, a community of more than 150 independent registered investment advisors throughout the country.

Article by Larry Swedroe, Advisor Perspective