Most of us fill our homes with treasured mementos and family items to not only remind us of our past, but also to inspire us as we look to the future. Often, these reminders take the form of pictures, books, artwork or inspirational sayings. What if one of these items was a document that dated back generations and expressed your family’s specific beliefs about how to live life well? This document—or family constitution—might represent what your family’s prior generations held to be important and what helped them navigate both good and bad times; consider how it might help shape your family’s finances, wealth, goals and legacy.
What is a family constitution?
In many respects, a family constitution resembles the Constitution of the United States in that it can serve as a written roadmap for future generations, and, in some ways, it can be considered a living and breathing document. It lives and breathes in that it not only recognizes things may change, but it also acknowledges that there are certain principles that stand firm with the passage of time.
Signed in 1787, the Constitution of the United States established, and still provides, a roadmap for current and future generations. It expresses what the founders considered to be important and was meant to be a North Star for both present and future generations. Furthermore, the Preamble to the Constitution provides a beautiful introduction that can also apply to a family constitution. The Preamble simply states:
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and Posterity, do ordain and establish this Constitution for the United States of America.”
Consider these attributes when thinking about your family constitution.
Also consider that, just as a family constitution passes from generation to generation, there may be amendments which are incorporated into the document, much like the 10 Amendments (also known as the Bill of Rights) that were added to the U.S. Constitution in 1791. In total, now 27 amendments have been added to the Constitution. Because wisdom seldom lives in only one generation, to have multiple generations add their thoughts (amendments) increases the value of the family constitution—just as it has increased the value of the U.S. Constitution—as the document passes into each new generation.
How should family constitutions incorporate family wealth management?
We have all heard stories of trust fund babies (TFBs). One of the main issues with TFBs is that there is little appreciation for the prior generation’s efforts in accumulating the wealth they are enjoying. Unfortunately, the old saying about the first generation creating the wealth, the second generation appreciating their efforts and enjoying its fruits and the third generation not understanding or appreciating what was done often repeats itself. In many families, much of the wealth that ultimately should have been sufficient for many generations disappears quickly. I would like to think that a family constitution would, at a minimum, provide a North Star for these families with generational wealth and hopefully help some of them avoid these unfortunate scenarios. Essentially, a family constitution would remind the family of what is truly important and that, sometimes, it is more impactful to give your family what you did have growing up as opposed to what you did not have.
Why create a family constitution with your family wealth in mind?
My great-grandfather, whom I was named after, had a nickname—“Happy.” He lived an amazing life, and from the stories that I have been told, was an incredible man. He was of Cherokee heritage, ran a small country store in Alabama (which was often a meeting place for people in the community) and loved his family. There are even stories of Hank Williams, Sr. sitting in front of the store singing and playing his guitar on several occasions. I love watching our old home movies and seeing my great-grandfather in action on those films, but the one thing I would love even more is a family constitution that had been drafted by him or even by his father or grandfather, expressing the guiding principles of their lives and what they found to be truly important.
In the end, a family constitution will not solve all familial problems or map out a comprehensive family wealth management strategy, but it is a start. At a minimum, it can let us know what prior generations considered important and what served as their North Star as they navigated through the family’s triumphs and challenges. With the collective wisdom of prior generations, hopefully we can pay it forward by giving future generations the opportunity to learn from the past and maximize their potential for success.
Jeff Helms serves as a Member and a Senior Client Consultant with Warren Averett Asset Management. He specializes in providing personal financial design solutions in the areas of retirement planning, risk management and insurance, estate and tax planning. Click here to learn more about Jeff or to reach out to him directly.