Family legacies don’t just happen.

Building generational wealth itself is a painstaking task – one that generally requires decades of sweat equity, inspiration and discipline.

However, once you have accumulated that wealth, you’ll encounter new challenges: managing that wealth, continuing to grow it and dispersing it among a few or many family members in a way that allows them to pass it down to future generations.

This is where family governance comes in.

Family governance is a structured framework and set of practices implemented by affluent families that enables them to optimally manage their wealth and assets. It involves processes, rules and communication channels that help the family make decisions, determine who is responsible for what, and – when done correctly – fosters an environment of transparency and collaboration.

The goal: Prepare your family not just to manage money now, but navigate potentially complex issues, such as succession planning, wealth transfer, philanthropy and the preservation of family values and legacies.

Establishing Decision-Making Processes

While the family head might make many key choices throughout the process, one aspect of family governance is establishing family-wide decision-making processes.

This typically will involve creating regular family meetings or councils to discuss (and agree upon) financial decisions. It also helps establish exactly who will be involved in certain matters – for instance, some decisions might be open to a wider number of family members, while others might only involve the nuclear family.

Defining Roles and Responsibilities

Family governance also defines the roles and responsibilities of each family member within the wealth management framework. A few examples of these responsibilities include:
  • Overseeing investments
  • Managing day-to-day family enterprise operations
  • Philanthropic activities
Responsibilities should not be assigned based on perceived importance or seniority. Instead, families should assign roles based on each family member’s qualities and strengths.

Mitigating Risks and Ensuring Continuity

A family governance plan also needs to focus on mitigating risks and ensuring that the wealth is appropriately transferred across generations.

Naturally, succession planning plays a central role. Families will need to determine their path on issues such as:
  • Estate planning
  • Family governance leadership transition
  • Business leadership transition (if applicable)
By proactively identifying and addressing risks now, families can navigate uncertainties with confidence and precision later.

The Role of Transparency and Communication

A family governance plan will quickly fray at the edges without transparency and clear communication.

The best guidance is for families to establish open channels of communication and share relevant information with all family members. This will promote trust and cooperation – qualities that won’t just empower informed decision-making and ensure all choices align with family goals, but that will also strengthen family relationships.

Implementing Family Governance

Implementing family governance requires commitment, collaboration and professional guidance.

At BluePointe Capital Management, we partner with entrepreneurial families to develop customized governance plans tailored to their unique needs and circumstances. Our team of experienced advisors provides expert guidance and support every step of the way, helping families establish robust governance structures that promote unity, resilience and long-term prosperity.

Being a part of a company that goes public brings with it myriad changes and new tasks to address.

The following action items are often overlooked by executives and employees when preparing their company for a public listing.

  1. Understand your vesting schedule, holding period, etc. for your non-qals and ISOs.
    Have a thorough understanding of the parameters you are operating in regarding your non-qualified stock options and incentive stock options (ISOs). With a stock option, you are given the ability to buy a certain amount of stock at a certain price before expiration. This is dictated by a vesting schedule.
  2. Design a plan for exercising your options and maximizing your tax efficiency (capital gains, ordinary income, AMT).
    Proper tax planning is critical before, during and after you contemplate exercising any options. The spread between the market price and exercise price for any stock grant is taxable income. It is important to be conscious of the tax liability you are incurring. Familiarize yourself with the different types of tax liabilities and different treatments under the IRS code.

  3. Know your Section 16 insider considerations, such as short swing profit rules, trading windows, 10b5-1 trading plans and company trading policy.
    These rules are important for all insiders to know as there are strict regulations governing trading actions. These may impact your liquidity, the timing of your transactions and your overall financial planning.
  4. Know your rights as a shareholder, and obtain copies of your shareholder rights agreement and right of first refusal. These documents aren’t always the easiest to track down, but if you ever need them, you don’t want to have to scramble to locate them.
  5. Evaluate your 83(b) elections. An 83(b) election is a way to pre-pay tax on the fair market value of an option within 30 days of your grant. As this is an irrevocable decision, it must be strategically thought out, considering all pros and cons.
  6. Design a comprehensive plan for liquidating your options.When selling options, an effective strategy includes a plan to pay for the exercise itself and tax implications of the exercise. You will also need to address any lock-up periods.
  7. Assess your concentration risk and risk tolerance, and diversify over time. An equity award may lead you to an overconcentrated position in one company. This can be risky. It likely makes sense to create a plan to diversify out of a concentrated stock position slowly over time.

BluePointe Capital Management offers a comprehensive suite of investment advisory services to entrepreneurs, VC/PE professionals, executives and family offices.

Contact us to learn more about how we can help you build and preserve wealth.

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