Family Wealth: — Keeping It in the Family — How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations, Revised and Expanded Edition

Chapter 9. Control Without Ownership

Control without ownership expresses a way of thinking, a philosophy. This concept, when practiced, powerfully assists a family to overcome the proverb "Shirtsleeves to shirtsleeves in three generations." Control without ownership means that each family member adopts the idea that "I am the owner of something if I control it, even if I am not the legal owner of that thing."

In the thirty-five years I have practiced law, giving up ownership of anything is the most difficult issue my clients have faced and yet, once done, the most wealth preserving. In the early years of my practice, I noticed that very few older family members made substantial transfers during their lifetimes to younger members, despite the fact that the liabilities that encumbered their family balance sheets could be substantially reduced if they did so. I therefore assumed that people generally had no desire to give anything away. As the years have passed, I have discovered that people are in fact very willing to give up ownership, but not control of decision making. Fear of loss of control is often so profound that it continues to permeate some individuals' planning processes after their deaths. Any of us who practice in this field, or who have closely observed wealthy families, know of estate plans that have attempted to "control from the grave" and left later generations leading dependent and unproductive lives. Every plan for long-term wealth preservation has to take the issue ...