Children in Family Office environments have the unique advantage of growing up with considerable financial resources at their disposal. However, with this privilege comes the responsibility of managing wealth wisely and understanding the legalities surrounding relationship property.
In many of the families we work with, financial management often falls into the hands of an individual. But what happens if that person can no longer fulfil that role? Have they passed on their financial knowledge to their partner or children? While contemplating a future without a key family member may seem daunting, embracing the opportunity to prepare for such scenarios can ultimately save significant time, money, and stress down the line.
This guide will equip you with the financial literacy and legal knowledge to navigate the complexities of managing your wealth effectively, ensuring your whole family can achieve peace of mind, no matter the circumstances.
Advanced financial literacy
- Wealth Management
Familiarise yourself with the components of your family’s investment portfolio, including equities, bonds, real estate, and alternative investments. Learn how asset allocation works to balance risk and reward in your investments. Your Family Office likely employs strategies that optimise returns while managing risk. - Trusts and estate planning
Understand the different types of trusts (e.g., revocable, irrevocable, discretionary) and their purposes in protecting and transferring wealth. Be aware of the estate planning strategies in place to manage inheritance, minimise taxes, and ensure a smooth transition of assets. - Philanthropy
Learn about your family’s philanthropic endeavours and the impact of charitable giving. Understand how philanthropy can be integrated into your financial strategy. If your family has a foundation, get involved to understand its operations, goals, and how it aligns with your family’s values. - Financial decision-making
Develop the skills to conduct due diligence on potential investments and business opportunities. This includes analysing financial statements, assessing market conditions, and understanding risk factors. Build relationships with financial advisors, mentors, and other professionals who can provide guidance and insights.
Understanding relationship property
What is relationship property?
Relationship property refers to the assets and debts acquired during a relationship. For Family Office kids, this includes understanding how these laws apply to substantial assets like business interests, real estate, and trusts.
Importance of relationship property in wealth management:
- Understanding relationship property laws helps protect your wealth in case of separation or divorce.
- Pre-nuptial and post-nuptial agreements can help define how assets should be divided, protecting family wealth from being unfairly distributed.
Legal framework in New Zealand
- The Property (Relationships) Act 1976 governs the division of relationship property in New Zealand, typically requiring a 50/50 split of assets acquired during the relationship unless otherwise agreed.
- Be aware of how your family trusts can be used to protect family assets from becoming part of relationship property.
Managing relationship property
- Have transparent discussions about financial matters with your partner to ensure mutual understanding and agreement.
- Engage with legal professionals to draft and review agreements, ensuring they are fair and legally sound.
- Maintain meticulous records of all financial transactions and agreements to safeguard your interests.
For Family Office children, financial literacy extends beyond basic money management to encompass sophisticated wealth management, strategic philanthropy, and an in-depth understanding of legal frameworks like relationship property. By mastering these concepts, you can make informed decisions, protect your family’s legacy, and contribute to its continued prosperity.
Continual learning and active involvement in your Family Office financial strategies are key to becoming a competent steward of your inherited wealth. Seek mentors, stay informed about financial trends, and always be proactive in managing your financial future. At Gilligan Sheppard, we offer a personalised Family Office service to help high-net-worth individuals organise their lives; click here for more information.
