Making Decisions as a Family | Northern Trust Making Decisions as a Family | Northern Trust
Skip to content

Making Decisions As A Family

Share

Share this article on FacebookShare this article on XShare this article on LinkedinShare this article via EmailPrint this article

Insights from research by Hugh Magill, Former Vice Chairman at Northern Trust.

A new construct is needed for talking and making decisions about wealth.

Some decisions families need to make are relatively easy. Where should we vacation this year? Where should we hold a birthday party? Decisions about wealth, however, tend to prove much more challenging. For example, how should we manage shared assets? Or, what should our family business succession plan look like? Simple solutions usually do not exist for these types of issues, and families often need to navigate complex interpersonal dynamics.

In prior generations, families generally followed a relatively straightforward process. An authority figure made the decision, which if communicated at all, was understood as final.

Today, this model is changing as families navigate more complex structures and adjust to generational shifts in attitudes, behaviors and preferences. While this presents a challenge for many families – who may not know what their model should be – it also opens the door to more fulfilling conversations. Dialogue can expand beyond the traditional concerns of “how much wealth will I receive?” and “how soon will I receive it?” to conversations that communicate family history, purpose and values.

Changing Family Dynamics

1920px-changing-family-dynamics TRADITIONAL FAMILIES CONTEMPORARY FAMILIES Nuclear family structure Authority within hierarchy Circumscribed communication Cultural homogeneity Diverse family structure Networking, participation and collabration undergrid authority Open communication Cultrual diversity
768px-changing-family-dynamics Nuclear family structure Authority within hierarchy Circumscribed communication Cultural homogeneity Diverse family structure Networking, participation and collabration undergrid authority Open communication Cultrual diversity TRADITIONAL FAMILIES CONTEMPORARY FAMILIES
375px-changing-family-dynamics TRADITIONAL FAMILIES CONTEMPORARY FAMILIES Nuclear family structure Diverse family structure Authority within hierarchy Networking, participation and collabration undergrid authority Circumscribed communication Open communication Cultural homogeneity Cultrual diversity

Echoes of a Changing Wealth Dialogue

1920px-traditional-families-02 PRIOR GENERATIONS None What will I get...and when? What was he/she thinking? Dialogue Pre-mortem expectations Post-mortem expectations
375px-traditional-families-02 PRIOR GENERATIONS Dialogue Pre-mortem expectations Post-mortem expectations None What will I get...and when? What was he/she thinking?
1920px-contemporary-generations-03 CONTEMPORARY GENERATIONS Philosophical concerns Practical concerns Tactical concerns HOW WILL WE PROVIDE FOR: HOW SHOULD WE TREAT: What will our legacy be? How much wealth is too much? How will we raise self-reliant/resilient children in wealth? When and how should we discuss wealth with children? How can we develop effective family collaboration and governance? How can philanthropy contribute to social good and family well-being? Aging parents and dependent children? Disabled siblings? Full-blooded children Half-blooded children Step children Artificial Reproductive Technology Children In-laws Non-marital partners
768px-contemporary-generations-03 CONTEMPORARY GENERATIONS HOW WILL WE PROVIDE FOR: HOW SHOULD WE TREAT: Philosophical concerns Practical concerns Tactical concerns What will our legacy be? How much wealth is too much? How will we raise self-reliant/resilient children in wealth? Aging parents and dependent children? Disabled siblings? Full-blooded children Half-blooded children Step children Artificial Reproductive Technology Children In-laws Non-marital partners When and how should we discuss wealth with children? How can we develop effective family collaboration and governance? How can philanthropy contribute to social good and family well-being?
375px-contemporary-generations-03 Philosophical concerns Practical concerns Tactical concerns CONTEMPORARY GENERATIONS HOW WILL WE PROVIDE FOR: HOW SHOULD WE TREAT: What will our legacy be? How much wealth is too much? How will we raise self-reliant/resilient children in wealth? When and how should we discuss wealth with children? How can we develop effective family collaboration and governance? How can philanthropy contribute to social good and family well-being? Aging parents and dependent children? Disabled siblings? Full-blooded children Half-blooded children Step children Artificial Reproductive Technology Children In-laws Non-marital partners

An Approach for Family Decision-Making

Talk about wealth regularly.

Many families spend very little or no time talking about wealth. This contrasts sharply with the amount of time they spend earning it and managing technical and tax issues. But ultimately, some of the most profound wealth management challenges that families face are more qualitative in nature.

Talking about wealth is the best way to confront these challenges and is every bit as important as creating an efficient estate plan —if not more so. For example, developing a wealth transfer plan without preparing your loved ones for the responsibilities of financial wealth entails real, but avoidable, risks such as financial mismanagement, entitlement syndrome and lack of productivity.

Learning to talk about wealth will also provide a foundation for future collaboration and decision-making, particularly for more difficult issues such as those associated with health care and the end of life.

Write it down.

In addition to talking about wealth regularly, consider including a Statement of Wealth Transfer Intent (SOWTI) in your estate planning documents to communicate important qualitative aspects relating to your wealth, such as your values, how your wealth was built and your goals for how your wealth may contribute to your beneficiaries’ well-being.

For more information about SOWTI’s, see Navigating Generational Divides and The “Goal Standard” of Estate Planning.

Build a decision-making model.

When a decision needs to be made, following a construct can facilitate greater buy-in and lead to better outcomes. Consider answering the following questions before you sit down as a family.

  1. What is the issue?

    In addition to defining the issue at stake, consider what you really want for everyone involved. What are your immediate and longer-term goals?

  2. Who is family?

    Think carefully about the inclusion or exclusion of family members as it relates to the decision. Whom do you consider family, and who will be impacted? Does your definition of family include your children’s non-marital partners? Does it include in-laws?

  3. Who is at the table?

    Which family members should you include in the actual discussion? Answers might range from the entire family to a relatively small number of people representing the collective group’s interests, depending on the issue.

  4. Which table?

    The setting for your discussion should align with the nature and complexity of the issue. The intimacy and warmth of an informal environment better suits certain conversations, while other discussions might benefit from a more formal venue.

  5. Who has decision rights?

    Who should make the final decision? Who has the authority to make such decision and how does that impact the discussion? This is not always clear but should be established upfront.

The Family Decision-making Continuum

1920px-family-decision-making-continuum-04 GOVERNANCE STRUCTURES FAMILY COUNCIL FAMILY CONSENSUS PARENTAL CONTROL FAMILY COMPACT Business and entrepreneurial endeavors Asset management Foundation managment Philanthropy Management of shared lifestyle assets Social and family activities Values discussions Children’s education Estate planning for minors Estate planning Rules of the road for family communication Health and life care issues BOARD ROOM DINING ROOM TABLE CONFERENCE ROOM KITCHEN TABLE STUDY
768px-family-decision-making-continuum-04 Business and entrepreneurial endeavors Asset management Foundation managment Philanthropy Management of shared lifestyle assets Social and family activities Values discussions Children’s education Estate planning for minors Estate planning Rules of the road for family communication Health and life care issues GOVERNANCE STRUCTURES FAMILY COUNCIL FAMILY CONSENSUS PARENTAL CONTROL FAMILY COMPACT BOARD ROOM DINING ROOM TABLE STUDY CONFERENCE ROOM KITCHEN TABLE
375px-family-decision-making-continuum-04 CONFERENCE ROOM KITCHEN TABLE BOARD ROOM DINING ROOM TABLE STUDY GOVERNANCE STRUCTURES FAMILY COMPACT PARENTAL CONTROL FAMILY COUNCIL FAMILY CONSENSUS Business and entrepreneurial endeavors Asset management Foundation managment Estate planning Rules of the road for family communication Health and life care issues Children’s education Estate planning for minors Philanthropy Management of shared lifestyle assets Social and family activities Values discussions

Learn to communicate openly.

In business and day-to-day life, we tend to approach conversations as debates. We often try to convince rather than understand, and consider ourselves successful when we have persuaded someone to adopt a position or action. While this approach sometimes works, it can also lead to misunderstandings or even conflict – particularly when family wealth is involved.

What is the alternative? In the book, “Crucial Conversations: Tools for Talking When Stakes Are High,” the authors offer an alternative model called “learning to talk tentatively.” This strategy invites others to add their viewpoints and focuses on building a shared understanding, even in situations where decisions have already been made. This style of conversation can significantly improve your effectiveness in family discussions. While this inclusive approach will likely take time to learn, the following guidelines can help:1

  1. State what you really want for everyone. Take the time to tell your loved ones what you want them to gain from the discussion.
  2. Share your path. People often understand dialogue best in story form. Explain to your family the factors and thinking behind your decision.
  3. Check and affirm. Instead of declaring, invite others to express themselves and ask questions.
  4. Allow quiet into your conversations. Periods of silence can provide permission for people to reflect more carefully on what they are hearing.
Wealth Management

Optimize Your Plan

Our experts can help you successfully navigate life changes and seize opportunity.

On Purpose

Subscribe for Our Insights

Sign up to receive our On Purpose publication to help you achieve your financial goals as intended.

  1. “Crucial Conversations, Tools for Talking When Stakes Are High,” Kerry Patterson, Joseph Grenny, Ron McMilan, Al Switzer, McGraw-Hill, June 2002.

Disclosures

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

Related Articles

  • Check
    Navigate to Avoiding Scammers Posing as the IRS
    Tax News You Can Use

    Avoiding Scammers Posing as the IRS

    Knowing how the IRS contacts taxpayers can weed out scams

  • Check
    Navigate to The Power of Early: The Annual Gift Tax Exclusion
    Trends & Strategies

    The Power of Early: The Annual Gift Tax Exclusion

    Maximize the benefits of the annual gift tax exclusion.

  • Check
    Navigate to 2025 Business Owner Benchmark
    Trends & Strategies

    2025 Business Owner Benchmark

    Find out what strategies business owners are pursuing for 2025.

  • Check
    Navigate to Make Your Impact, While Achieving Your Financial Goals
    Trends & Strategies

    Make Your Impact, While Achieving Your Financial Goals

    What difference do you want to make?

Explore Specialized Advice

    Slide 1 of 5
  • Check
    Navigate to Business Owner

    Business Owner

  • Check
    Navigate to Executive

    Executive

  • Check
    Navigate to Multigenerational Families

    Multigenerational Families

  • Check
    Navigate to Elevating Women

    Elevating Women

  • Check
    Navigate to Family Offices

    Family Offices