How to Create a Family Wealth Mission Statement

July 17, 2023
Lack of communication could be detrimental not only to a family's harmony but also its ability to preserve wealth across generations. Creating a mission statement can help.

When steamboat and railroad magnate Cornelius Vanderbilt died in 1877, he left an estate worth an estimated $200 billion in today's dollars. Less than 50 years later, most of it was gone.1 Contemporary media accounts of lavish spending by some of Vanderbilt's heirs helped cement ideas in the popular consciousness of a fortune squandered on fine art, fast horses, and nice boats, and perhaps gave credence to a general perception that family wealth tends to deplete with each generation—the old "shirtsleeves to shirtsleeves in three generations" curse.

Of course, an inheritance doesn't have to be an express ticket to penury. But with U.S. households projected to transfer $84 trillion to heirs and charity over the next two decades,2 it's also worth asking: Is a carefully wrought estate plan enough?

"For a legacy to endure, families need to engage in a deep discussion about shared values, vision, and purpose," says Susan Hirshman, director of wealth management at Schwab Wealth Advisory, Inc. "Most wealth transfer challenges stem from a lack of communication within the family. That's where a family wealth mission statement comes into play."

In short, a wealth mission statement is a document laying out a family's values and vision for its wealth. It's neither legally binding nor enforceable. Think of it as a North Star each generation of a family can use to orient themselves as they become inheritors and custodians of the family's legacy.

Here are some thoughts on how to create one your family can use.

The importance of being earnest.

"A family wealth mission statement is all about connecting values, building cohesiveness within your family, and sustaining wealth over time," Susan says. "It's about sitting down together and saying, 'We represent ourselves as a family and we want to make sure our wealth is a benefit for our kids, not a hindrance.'"

Consider the case of the Vanderbilts: Cornelius Vanderbilt seems to have expected his heirs to at least manage, if not expand, the business empire he built. Initially, they did. Then as the years passed, later generations divided the family's holdings—selling off their stock or stepping away from business roles—as they pursued their pet passions, from decadent high living to philanthropy.

Now, the Vanderbilts are an extreme case. Not many families have a transportation empire to preserve, and it may not be reasonable for one generation to dictate the spending habits of every generation that follows. But it's certainly fair for a family to want its wealth to benefit as many generations as possible.

It starts with a conversation.

An important first step is for family members to agree on the purpose of their wealth—so they know what to do with it.

"Family members should examine their attitudes and beliefs about money, especially the 'how' and the 'why' behind these beliefs," Susan says. "How did we arrive where we are? Why is it important to us to remain here? The idea is to gain a fuller understanding of the meaning of money, priorities, and personal and family goals.

"For example, what is the origin story for the family's wealth? That can be a great starting point that can captivate younger family members," she adds. "Involving the next generation is one of the most crucial steps for sustaining a family legacy."

Families also need to define how and why they want future generations to benefit from inherited wealth. How should the family build and grow its wealth? Is philanthropy an objective? What are acceptable behaviors between family members? If there's a family business, should the family continue to manage it?

While conversations about death and money can be intimidating for parents and grandparents, an experienced advisor such as a financial consultant or an attorney can help, providing talking points and prompts, and even moderating the discussion.

One way to take the pressure off these conversations is to have them during a gathering such as a summer retreat or a holiday weekend, when family members can swap stories that enhance their emotional connection to the past.

"You want to cultivate an atmosphere of open communication in which your family talks about its history, values, and responsibilities," Susan says.

 

How your Schwab Wealth Advisor can help

Your Schwab Wealth Advisor can connect you to a trust and estate specialist who can assist you in creating a family wealth mission statement, help guide your family's conversations, and prepare you for meetings with your estate planning attorney.

Your Schwab Wealth Advisor can connect you to a trust and estate specialist who can assist you in creating a family wealth mission statement, help guide your family's conversations, and prepare you for meetings with your estate planning attorney.

Evaluate and execute.

When everyone in the family has agreed on their shared values and vision, it's time to put pen to paper, so to speak, and construct a mission statement that outlines the family's commitment. The document can be as simple or as complex as members see fit, but generally should address how they view the family's legacy and how future generations can make decisions that are consistent with their goals.

To streamline the process, you might consider selecting one family member to draft the document after gathering everyone's input, and then share it with the family to approve it. Despite the non-binding aspect of the mission statement, some families find that physically signing the document can be meaningful act of enshrinement. "Every member of the family should receive a copy, and the original can be prominently displayed or simply filed with other estate planning documents," Susan says. "It may not be legal, but estate planners and trustees tend to use mission statements as important references that help them interpret the original grantors' voices, values, and intent."

However, this is not a "one-and-done" exercise. "Families grow, children age, circumstances change, and priorities can shift, so it's important to revisit the mission statement every few years or whenever there are major developments in the family's situation," Susan says. "In my view, the process of creating and maintaining the document perhaps has the greatest impact in sustaining family harmony."

1 "The Vanderbilts: How American Royalty Lost the Crown Jewels," Forbes, forbes.com.

2 Cerulli, U.S. Retail Investor—Wealth Transfer 1Q23 Edition, cerulli.com

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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

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