Emily Bouchard, a fractional chief learning officer for family offices, has worked with families in both single family offices and multifamily offices on issues ranging from family education to succession planning. She discusses the ways family evolution can affect the family office:
How do you define family, and why does it matter?
In family offices, how we define family, and how we support family and educate family, really matters. For example, imagine a family where the estate plan is set up, for whatever reason, to follow the bloodline. Everybody in the family needs to understand what that actually looks like. How do we make sure people are prepared for it, especially if divorce and remarriage happen? We’ll have scenarios where things are fair but not equal, and that’s going to feel unfair to some people.
What types of family complexity have you encountered in your work?
The bloodline issue is one example. I worked with a family where some very old trusts — set up generations ago — stipulated that only children in the family bloodline could be beneficiaries. For one of the family members, this meant that even though he adopted his wife’s children from some prior relationships, when he passed away, all the corpus of his trust that he was beneficiary of would go to his two biological children that he had with his wife, and not to the four that he adopted.
So, he did a lot of work with the family office, and we did a lot of facilitation to educate the four to tell them he was giving them the maximum he could during his lifetime, but that would not continue after he passed away. We educated them about how to maximize what they were being given so that it served them and their families as much as possible, because he really wanted that for them. But there were things that weren’t in his control.
Another issue has to do with spouses who work in the family office. I worked with one family where a member of the younger generation had a spouse who was an exceptional staff member of the family office. He was really valued, and when the two of them decided to get divorced, it was a major moment: Can he still work in the family office? How is this going to work?
Because they had children together and he had a vested interest in his children benefiting from the family office’s work — and it was an amicable enough divorce — they made the decision that he would stay working in the family office because he was such an asset to it.
How can remarriages affect family offices?
Remarriage does have an impact on family offices. Is a second family getting created? Is the new spouse coming with their own children from other marriages or other relationships? It becomes really complicated for the family office executives and staff, because all of your typical planning that’s looking at a traditional nuclear family doesn’t necessarily apply once you’re in a stepfamily situation.
Things can get complicated really quickly: Who is going to inherit the house? Is the house going to the biological kids but the stepparent is going to continue living in it? Is there a life insurance policy that’s going to continue to have the former spouse as the beneficiary?
Can prenuptial agreements help prevent these problems?
They can. But how it’s handled makes a big difference in terms of whether the new spouse feels like they’re being incorporated into the family or being told that they’re always going to be second-class citizen.
I’ve worked with hundreds and hundreds of families, and every time I interview an in-law, the No. 1 thing that happens is they tell me about how painful the prenup process was, and how there’s still resentment about how they were treated. The human mind will always presume the worst. Some see a prenup as saying that you’re planning for a divorce, or you’re treating me already like I’m a gold digger.
This is avoidable. You don’t have to start off that way. There are other options. I reframe it for people this way: You’re entering into a really important legal contract, and if you don’t have an agreement, the state you live in will determine a lot of things about the future in the event of not just divorce, but death or even severe disability. So, let’s be proactive and do it together while we really love each other: talk about what we would want to happen in different situations, as opposed to letting people that have no idea about the complexities of our life decide things for us.
