Family Constitution and Legacy Letter

What is Family Constitution and Legacy ?

Introduction to Family Constitution and Legacy:


As the saying goes – “wealth does not last beyond three generation”. This is a phenomenon that transcends cultures. The high failing rates of transferring wealth from one generation to the next is usually caused by misaligned expectations, communication problems, a breakdown of trust, the lack of an agreed decision-making process and an authoritative figure that is capable of resolving family disagreements within the family. Whilst legal instruments like wills and trusts have been utilized to facilitate succession planning and transition of wealth to next generations, we cannot deny that there are also intangible and invaluable legacies to be passed down from generation to generation in order to ensure continuous prosperity, harmony and unity for the family. According to a famous Chinese proverb – harmony brings wealth. Studies have also demonstrated that successful families are bound together by strong values and purposes, as shared values are the glue to bring about family cohesiveness and keep family businesses thriving across generations. A lesson worth learning from successful sophisticated families in Western countries is to have in place family governance to ensure that decision making processes, values, guiding principles and valuable lessons of the family are properly and clearly organized and documented.


Family Constitution

Big families are like small countries – they need rules in order to ensure that the members live in harmony. Especially so in families with businesses, as the family business grows, informal rules of the family will not be sufficient to deal with the increasing complexity of running and owning multiple businesses and diverse assets together. This is of particular concern where some family members do not have managerial roles, are not shareholders of the business, or if family members have incompatible personalities that could affect how business decisions are to be made. Thus, big families should consider putting in place a family constitution as a part of its family governance and succession planning which sets out the “rule of law” for family members to be organized and provide a fair process for the family to make joint decisions. A family constitution, although not legally binding, is a powerful document in ensuring family cohesiveness and acting as a road map to steer the family forward harmoniously, especially in cases where the patriarch or matriarch of the family are no longer alive. It is often prepared in consultation with the family members, in view of ensuring that each member’s views are taken into consideration and encouraging accountability within the family. It is intended to be an evolving document so as to meet the changing needs of the family.

Legacy Letter

While a family constitution is intended to set out rules and often works best in families that run businesses or in sophisticated high net worth families, a legacy letter is a more general document that could be useful to anyone regardless of the extent of their wealth. Even though a legacy letter is a non-legally binding document, it works beautifully with the will to convey important non-tangible wishes. For example, a father may choose to distribute his assets to his children in an unequal fashion where a child who has the lowest earning capacity may be entitled to more than the others. Rarely would such reasons be captured in the will. On reading a will with such an unequal distribution, the children may, upon demise of their father, end up having strained relationships. In certain cases, the father may not be able to meet all the expectations and wants of his children in terms of succession and wealth distribution. In order to reduce misunderstandings and provide assurance and comfort, he may consider penning his reasons and motivations in a legacy letter. Such a letter, despite not having any legal effect, can be very meaningful and powerful in more ways than one. It is also a wonderful way to pass on valuable life lessons, cherished memories, values, dreams and hopes for the family. Afterall, it is indisputable that legacy goes beyond wealth and if we think it is precious enough, it would make sense to pass it down.

While we cannot stress enough on the importance of getting legal documents like a will and/or a trust in place, we should not neglect that succession planning is more than just a distribution of wealth – it is also an opportunity to pass on one’s wisdom and values to the next generation. Where applicable, a family constitution and/or a legacy letter can complement the legal aspects of a will and/or a trust to ensure that your succession planning process is holistic. More importantly, it sends a clear message to your loved ones – that you truly care.

If you would like to find out more about how a family constitution or a legacy letter works, or if you would like to know how you can leverage on these documents can complete your succession planning strategy, please feel free to contact us.


Gary Leong

Executive Director – Business Development



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