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Family Wealth Management: Seven Imperatives for Successful Investing in the New World Order by Tom McCullough, Mark Haynes Daniell

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Chapter 24

Determining the Right Wealth Distribution Strategy

The family’s wealth distribution policy, which sets out the principles of who gets what when and for what purpose, can have a significant impact on the growth and preservation of family wealth and the long-term health of the family. It is also essential to manage both the financial and family aspects of distribution if wealth management objectives and imperatives are to be respected.

There are two reasons for this. The first is quantitative and deals with the numbers on family wealth and distribution policy; the second is qualitative and addresses issues related to family values and individual behavior.

In both cases, transfer of wealth, similar to transfer of authority through succession in a family business, is best managed through a three-step process:

1. Preparation and communication.
2. Transfer in an appropriate context.
3. Follow-up to ensure that the distribution or transfer of substantial wealth is having, on balance, the desired effects.

A well-designed approach that follows these three steps can address the series of interrelated issues around distribution decisions: how much (both a quantitative and qualitative issue), when, how, in what context, with what messages and limitations, and with what preparation and obligation on the part of the beneficiary.

The Financial Perspective

The hard fact is that aggregate distributions in excess of real aggregated after-fees-and-costs-and-inflation returns on the portfolio ...

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