Wellmeaning Companies: Family, non-family and financial family office succession

When Veronica Maldonado’s father died last year, he left his estate in a trust for her and her siblings.

Now Maldonado is the board chair of The Wellmeaning Companies, a real estate and investment company with a family office for herself and her siblings. The name was chosen by their father because it was a favorite phrase of his. Maldonado’s brother is the president, managing the office’s day-to-day operations. The siblings are also part of the GEM (Grupo Economico Moldonado) family office that includes their cousins and their father’s siblings.

GEM has its origins in an agricultural and industrial business that Maldonado’s family had in Venezuela. During the presidency of Hugo Chavez, the state confiscated the ranch that for 100 years had been the heart of the family business. The family made the gut-wrenching decision to rebuild the business in the United States, where they bought new operating companies (Indian River Select Juices and FreshCo co-packing company) and made real estate and financial investments. They also maintain an investment portfolio. Wellmeaning came from Maldonado’s father’s wealth from GEM and his investments in real estate and in the stock market.

Maldonado’s experience illustrates some of the complex considerations that go into succession planning for family offices.

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For example, the board for this family office — which consists of Maldonado, her brother, their outside advisor and the trustee (also external to the family) — was set up while their father, Alvaro Maldonado, was alive. Putting a structure in place before it’s needed is critical, Maldonado says.

“I am so grateful to him – you’re overwhelmed with grief, and I can’t imagine what it would have been like to be setting it up and talking to lawyers and talking about taxes while your family is all grieving,” Maldonado says. “Even for us it was difficult, and we did have a structure. We had to figure out: How do we work together? How do we work with our trustee? How do you work with your siblings, who you have known your whole life but have never necessarily had to work with?”

Planning for multiple types of succession

These are just some of the issues that families and family office professionals need to consider in their succession plans. Generational transitions require both planning and discussion.

Harvard Business School’s Christina R. Wing, who is also the founder of family business consultancy Wingspan Legacy Partners, suggests looking at three dimensions of family office succession:

  • Family member succession.

“Typically there is one family member that has the mandate to manage the family office, either as the CEO of the family office or as the chairman of the board or of the investment committee,” Wing says.

The succession plan needs to either name the next decision maker or create a process for choosing one. If the family office is currently run by the family matriarch or patriarch and the wealth is being passed on to multiple children, the next generation may need a more sophisticated governance structure, as well.

  • Financial succession.

An estate plan — which needs to account for issues like taxes in addition to the desires of the family — is the main vehicle for passing money from one generation to the next.

One issue to address in making these plans: Are the inheritors required to continue investing within the family office? Many wealth creators are reluctant to lock their children in, though in some cases, much of the money may be tied up in a business or other illiquid investments.

One alternative, Wing says, could be to say the children need to keep their money together for a set period of time — long enough to make considered decisions about how they want to invest going forward and take care of illiquid positions.

In Maldonado’s case, her father set up a trust that forced his seven children to work together, rather than simply dividing his estate and leaving each child a share.

“My father believed that nothing should come easy – you have to work for it. He was not going to just leave us money,” Maldonado says. “He also had a strong sense of family. He was a firm believer that when you receive something, you care for it, and you pass it on for the betterment of the next generation and the community where you live.”

  • Succession of non-family team members.

Family offices with non-family staff members also need to prepare for the fact that their employees may move to new jobs or retire. In some cases, a succession plan could identify other employees who could be promoted into key roles. If that is not feasible, the plan can explain how key responsibilities can be covered while a search is performed.

A related issue pertaining to non-family team members: It’s important for members of the rising generation to get to know them so that they have a relationship in place when it comes time for them to take over.

All of these plans should be reviewed regularly.

Moving forward
Maldonado and her siblings are now looking to the future.

“In Wellmeaning, we are transforming our family office. Rather than a cost center where family members get different services, we are creating a real estate company and a portfolio of investment companies, and have it function as an organization,” Maldonado says. “We’re right in the middle of rethinking it.”

They could consider even larger changes, though there would be emotional hurdles as well as the logistical ones to overcome.

“Now my father has passed. Could my generation decide this is not working out for us? We would have to disband the trust, and we would have to figure that out ourselves, because the structure doesn’t envision that,” Maldonado says. “With time, I’m thinking the current structure has its benefits. I’m super proud of what our family has done, and it’s been incredibly rewarding.”

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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