The statistic about wealth disappearing by the third generation is quoted so often that it has stopped meaning anything. What is useful is the mechanism, and the mechanism is almost never investment performance. Capital is dissipated by unpriced illiquidity, by governance that cannot survive its founder, and by conversations postponed until an event forces them.

Three structures, three different jobs

A holding structure decides who owns what. A governance structure decides who decides. A liquidity structure decides who can leave, on what terms, without breaking the whole. Families routinely build the first, assume the second, and never build the third — and it is the third that fails first, usually at a divorce, a death or a disagreement.

Decision rights before instruments

Before a vehicle is chosen, four questions should have written answers. Who may commit the family’s capital, and to what size? What requires unanimity, what requires a majority, and what requires only notice? How does a family member exit, and at what valuation basis? And who arbitrates when the answers are disputed?

Families that can answer those four can implement almost any structure successfully. Families that cannot will find that the most elegant trust deed in the world does not tell them what to do on a Tuesday.

Structure is the answer to a question the family has already agreed on. It is a poor way to have the argument.

The liquidity calendar

We ask every family we work with to build a twenty-year calendar of foreseeable liquidity events: generational transfers, anticipated exits, philanthropic commitments, education, the retirement of the operating principal. Almost nobody has one. Almost everybody, once they build it, discovers a cluster of obligations in a single three-year window that nobody had put side by side.

Preparing the next generation is a programme, not a conversation

  • Exposure before responsibility: observing the family council years before sitting on it.
  • A defined, small pool of capital under genuine personal responsibility, where a loss is affordable and instructive.
  • Access to the family’s advisers directly, rather than always through the principal.
  • An explicit, stated path to a seat — with criteria, not with a birthday.

The soft infrastructure

The durable families we have worked with share three unglamorous habits. They meet on a fixed calendar whether or not there is business. They write down what was decided and circulate it. And they have one person — often an adviser rather than a family member — whose standing role is to raise the subject nobody wants to raise.

None of that appears in a structure chart, and all of it determines whether the structure chart survives contact with a real family.

This paper is general in nature. Structures, tax treatment and fiduciary duties differ materially by jurisdiction; nothing here is legal, tax or investment advice, and every structure described should be reviewed with qualified counsel in the relevant jurisdiction.