The Beginning: A Structure
As laws and tax regimes grow more complex globally and families in the GCC evolve across multiple generations, the concept of family governance increasingly captures the attention of our clients at The Family Office. Governance often begins with establishing a company or trust to centralize assets, streamline efficiencies, and encapsulate the high-level wishes of a family's patriarch or matriarch. However, this initial step is merely the foundation for broader possibilities in family governance, which we will explore further in this article, highlighting emerging trends and how The Family Office can guide clients through these evolving complexities.
Family Constitutions
To address more specific aspects of wealth management and generational spending, some families opt to draft a family constitutional document. While a trust structure may manage assets, a family constitution can broadly dictate how the patriarch or matriarch desires the family wealth to be utilized—covering everything from the operation and succession of the family business to travel plans and investment strategies. This document, which may be included in trust documentation or a will, is not always legally binding and should be drafted with professional legal advice. It represents a sophisticated tool for guiding family culture and ensuring the preservation of wealth through generations.
Family Funds
For large families with diverse needs and sophisticated investment portfolios, creating a family fund structure offers a tailored solution. Such structures allow family branches to opt in or out according to their specific financial needs, whether they are seeking income or capital growth. These complex arrangements require professional advice, which The Family Office is prepared to facilitate, ensuring alignment with the family's investment objectives and risk profiles.
GCC Operating Businesses
A critical element of effective family governance is ensuring that the activities and transactions of the family’s operating businesses are distinct from investment holdings. This segregation is crucial to avoid legal, taxation, and political issues that can arise from asset contamination—especially pertinent in the GCC where families often encounter challenges related to the use of shared bank accounts for diverse business and personal transactions. For families concerned about these issues, The Family Office offers health checks conducted by our expert advisors.
Conclusion
While trusts and companies provide a solid foundation for governance, separating family business operations from investment activities is vital. The Family Office can assist you in exploring these options and coordinating with the appropriate legal and financial experts to implement advanced strategies, such as drafting a Family Constitutional document or establishing a Family Fund, in accordance with your specific needs. For those interested in detailed guidance or wishing to understand how these strategies can be tailored to meet specific family needs, we encourage you to reach out to your financial advisor at The Family Office today.