3 Keys to Managing Shared Family Assets

Elaine King

Imagine a couple buys a cottage together. It’s a cute little place down by the lake featuring a dock, a beautiful front yard with a willow tree, and 4 spacious bedrooms. As the couple ages, they decide to leave the cottage to their three children.

This is a wonderful, beautiful idea. However, it can quickly turn into a mess if it isn’t managed well from the start. Just imagine the children trying to decide who gets to visit the cottage over the summer, how to divide up payments for maintenance, and what to do if one of them runs into financial hardship and wants to sell off their share.

Whether you’re hoping your family can share a cottage, business, an investment portfolio, or another asset, there are some strategies you can use to make sure the sharing goes well. Here are the 3 keys to managing shared family assets:

1. Make an Agreement

Make a comprehensive agreement that covers all of the basics of the asset. For example, in the case of the cottage, the agreement might address:

  • Visiting times
  • Opening and closing responsibilities
  • Who makes payments for utilities or other services
  • Are guests allowed? Will renting be allowed?

For other assets like investments, management considerations might be in the agreement. For instance:

- Who will manage investments?

- How will investment managers be chosen?

- How will shares of the investment be divided?

Similar considerations should be in play for businesses. For example:

  • How assets in the business are divided
  • Roles of different family members in the business
  • Are non-family members allowed to hold shares?

A comprehensive agreement can help avoid misunderstandings and conflict that can arise when family members don’t know what to expect about the shared asset.

2. Think Ahead

Things change quickly over time! It’s important to think 5, 10, 15, or 20 years down the road and imagine what sorts of situations might arise. For example, in the future, how much will different assets be worth? Investment accounts may grow at different rates than a business. Property values may rise or fall. So, will the distribution of wealth be fair in the future based on how items are divided now?

Another concern for the future might be inheritance. For instance, what will happen when an heir dies? Will their spouse inherit the portion of the asset? Or will the children inherit it?

Yet another concern might be finances. At some point, an heir may decide they wish to sell their share of the asset. This may happen for any number of reasons, including financial hardship. Should this happen, will a non-family member be allowed to purchase the share?

3. Communication

The key to long-term success with shared family assets is continued communication. The shared asset agreement should be regularly updated and there should also be space for questions and concerns to be raised. In addition, it’s important to track the success, future, and growth of the shared asset and discuss this among the family members.

To make sure you communicate regularly, you may consider holding a “Family Council.” For many families, this might be a biannual meeting or an annual meeting. Remember, you can always do it virtually if family members don’t all live close to each other.

Sharing a cottage, business, or another asset takes some effort and planning, but the final result is well worth it. It is a beautiful gift that can be preserved for generations to come, a wonderful family legacy and gift that brings the family together.

Want to learn more? Follow Elaine King, expert in multigenerational family wealth, on Facebook, Youtube, Instagram and Twitter.

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Elaine King - Family and Money Matters™ 2021