Only 12% of family assets reach the third generation. Just 3% reach the fourth. This figure, drawn from research by Roy Williams and Vic Preisser (Preparing Heirs, 2003), is routinely misread: people assume the culprit is taxation, inheritance law, or legal structure. The reality is different. In the vast majority of cases, it is human behaviour—conflict, absent rules, unspoken assumptions—that destroys what money and effort built.
Family governance is the structured response to that risk. This guide explains what it is, why it is indispensable, and how to put it in place.
What is family governance?
A simple and practical definition
Family governance is a structured set of rules, bodies, and processes designed to organise the relationship between a family and its assets. Its purpose: ensure the continuity of the estate, anticipate conflict, and prepare intergenerational transfers.
In practice, it answers the concrete questions families routinely avoid: who decides what? Beyond what threshold does everyone need to agree? How are disagreements handled? What happens if a family member wants to sell their share? How do you prepare children to take over?
What family governance is not
Family governance is not a notarised contract. It is not a will or a succession agreement. Those instruments are essential, but they only govern the legal and financial aspects of a transfer. Governance covers behaviors, roles, responsibilities, and decision-making processes—the things legal documents cannot regulate.
Nor is it reserved for large industrial dynasties. Any family that holds property, a business, or assets across multiple countries needs some baseline governance to prevent human conflict from eroding what has been built. This governance can be implemented through legal structures, governing bodies (family assembly), and governance instruments (family charter) tailored to the family’s patrimonial and personal objectives.
The 3 pillars of family governance
To understand its usefulness, family governance rests on the balance of three distinct spheres that coexist in every wealthy family. The three-circle model—Family, Ownership, Business—was formalised by researchers Tagiuri and Davis at Harvard Business School in the 1980s and remains the academic reference in the field.
1. The Family — preserving harmony and transmitting values
The family sphere covers human relationships, shared values, children’s education, and the preparation of heirs. Sound governance organises how the family communicates, makes collective decisions, and passes its values from one generation to the next—independently of financial considerations.
2. Ownership — organising asset holding and rights
The ownership sphere covers asset holding, share distribution, liquidity rules, and each family member’s rights over shared assets. Without clear rules at this level, every life event—marriage, divorce, birth, death, incapacity, or a desire to exit—can become a source of destabilisation.
3. The Business or Estate — ensuring performance and continuity
The third sphere covers operational management of the assets—whether a family business, a real estate portfolio, or financial assets. It requires its own governance: decision-making bodies, performance indicators, long-term strategy.
The difficulty—and the main source of conflict—arises when these three spheres blur together. When a family member who runs the family business speaks at a board meeting, are they speaking as a shareholder, as CEO, or as a son? Governance exists precisely to clarify those roles.
Why families avoid the conversation—and why that is a mistake
Money remains a taboo even in the wealthiest families
Talking about money within a family is hard—including, and often especially, in the most affluent ones. The subject gets avoided to spare feelings, prevent jealousy, head off internal conflict, or simply because the current generation wants to stay in control. It gets deferred. And deferred becomes never.
That reluctance carries a real cost. A family that has never openly discussed its assets, its wishes, and its rules will be forced to do so under the worst possible circumstances—mid-succession, mid-crisis, with raw emotions and diverging interests.
Conflicts come from behaviour, not taxation
In their study of 3,250 wealthy families over twenty years (Williams & Preisser, Preparing Heirs, 2003), researchers attributed 70% of failed transfers not to tax or legal causes but to three human factors: a lack of trust and communication within the family (60%), inadequately prepared heirs (25%), and the absence of clear governance rules (10%). Tax and legal causes account for just 3% of failures.
Taxation can reduce an estate. A family conflict can destroy it entirely—and far more quickly.
Succession unanimity — a legal requirement with serious consequences
Why unanimity is a weapon in the hands of the difficult heir
In a community of heirs, Swiss law applies a strict principle: heirs jointly own the entire estate until the partition is finalised. In practice, this means decisions must be taken unanimously. This unanimity covers management and disposal of estate assets within the community of heirs. It does not allow heirs to unilaterally override the legally binding wishes of the deceased.
Unanimity sounds like the fairest rule—everyone must agree, so no one can be harmed. In reality, it can turn against the heirs themselves.
Under unanimity, every member holds an absolute veto. A single uncooperative, poorly informed, or bad-faith heir can block every decision—sales, investments, operations—for months or years. That blockage costs them nothing. It costs everyone else everything.
A concrete example: one heir blocks an entire succession
Consider an intestate succession with several properties, including high-value land. Maintaining the full value of these properties requires substantial maintenance work to be carried out. All heirs want this to be done—except one. The result: years of deadlock, irreparable family tensions, and an eroding estate while the discussions drags on. Until such time as the only exits are either for the judge to appoint a representative of the community of heirs until the estate is divided, or for proceedings to be brought for the division of the estate.
This scenario is avoidable. It requires anticipating the rules at a point when heirs were still able to talk to each other—because changing the unanimity principle itself requires unanimity.
Simple majority, qualified majority — what difference does it make?
There are several modes of collective decision-making, each suited to different situations:
- Simple majority (50% + 1 vote) works for routine, reversible decisions. It keeps things moving without getting stuck.
- Qualified majority (two-thirds or three-quarters of votes) fits significant structural decisions: selling a major asset, admitting a new member, amending the articles.
- Unanimity should be reserved for fundamental, irreversible decisions only—dissolution of the structure, full liquidation of common assets.
Well-designed governance specifies exactly which type of decision calls for which voting rule. This is not a question of distrust. It is a question of protecting everyone.
Conclusion
Family governance is not a luxury. It is a practical, accessible tool—indispensable whenever a family shares assets and decisions over the long term.
Rules do not put themselves in place. Someone must facilitate the first conversations, structure the processes, and ensure the family’s interests stay at the centre—not those of the providers surrounding it.
If you want to assess the governance of your family estate, MB Projects works alongside you from the first conversation through to a durable structure.
