Why a family governance letter matters
Families transfer more than money at death: they transfer values, expectations, and responsibilities. A family governance letter lays out how the family wants its resources used and how decisions will be made, reducing ambiguity that commonly fuels disputes. In my 15+ years advising multigenerational families, I’ve seen governance letters reduce conflict by providing a reference point for conversations and decisions during emotional periods.
Authoritative organizations recommend documenting governance preferences and preparing heirs early (see resources from the Institute for Preparing Heirs and the Consumer Financial Protection Bureau). These letters are not a substitute for legal instruments, but they are a powerful complement that guides behavior and family meetings (Institute for Preparing Heirs, 2023; Consumer Financial Protection Bureau).
Who should write one and when to start
Anyone who expects to leave assets to family or who wants to set shared expectations should consider a governance letter. It’s particularly helpful for:
- Blended families and families with stepchildren
- Families with business or real estate interests
- Families planning charitable legacies or educational funds
- Families concerned about asset management or heirs’ readiness
Start early — well before an illness or death — and treat the letter as a living document that you review every 2–5 years or after major life changes (marriage, divorce, births, business sale). For guidance on updating legal documents that should accompany governance statements, see FinHelp’s guide on Updating Estate Documents After Major Life Changes: https://finhelp.io/glossary/updating-estate-documents-after-major-life-changes/.
Core sections to include (step‑by‑step)
Use these sections as a template. You can adopt all or only those that fit your family’s needs.
- Opening statement and scope
- One- to two‑paragraph preface stating the letter’s purpose, who wrote it, and who it’s intended to include (direct descendants, spouses, family council members, etc.).
- Family mission and values
- A succinct mission statement (one or two sentences) and a short list of core values (examples: education, philanthropy, business stewardship, privacy).
- Goals for wealth
- Short-term and long-term goals (e.g., fund college for grandchildren, keep the business in family hands, make annual charitable gifts).
- Roles, decision makers, and governance structure
- Define roles (family council, trustee, executor, family office) and how they are chosen or removed. Specify meeting cadence and quorum rules.
- Communication plan
- How and when family meetings will occur, who may attend, and what information will be shared (financial statements, advisor reports). Include a communication protocol for sensitive announcements.
- Conflict-resolution procedures
- Preferred methods (internal mediation, third-party mediator, arbitration), escalation path, and whether the family will cover dispute-resolution costs.
- Distribution principles (general, not legal specifics)
- High-level intentions about distributions (equal shares vs. need-based support, education-first provisions). Do not include legally binding distribution instructions — those belong in wills/trusts.
- Stewardship and asset management expectations
- Guidance for heirs who will manage family businesses or real estate, including training, mentorship, and succession timelines.
- Philanthropy and legacy projects
- Vision for charitable giving, criteria for grants, and stewardship of any family foundation or donor-advised fund.
- Review and amendment procedures
- Who may propose changes, how changes are approved, and how family members are notified of updates.
- Signature and date
- A place for authors and endorsing family members to sign (signatures reinforce commitment but do not create legal obligations unless integrated into contracts or trusts).
Practical drafting tips and facilitation advice
- Use neutral facilitation. A financial planner or family mediator reduces emotional escalation and keeps the process focused. In my practice, neutral facilitation shortens the drafting timeline and increases buy-in.
- Be inclusive but practical. Invite representatives from each branch of the family early; limit meeting sizes when deciding sensitive details.
- Keep language plain. Avoid legalese and absolutes like “never” or “always.” Use present tense statements of intent.
- Separate values from legal instructions. State intentions in the governance letter and place binding instructions in legal documents drafted by an attorney.
- Prepare an executive summary. Many family members will only read one page; give them one.
- Document decisions in meeting minutes. That record helps track the evolution of agreements and prevents confusion later.
Sample excerpt (short form)
“We, the Smith family, commit to supporting educational opportunities for descendants, maintaining family-owned real estate as a shared asset, and settling disputes through mediation before litigation. We will hold a family council meeting every 12 months. This document expresses our shared intentions and is a supplement to our legal estate plan.”
Use this as a model to craft language tailored to your values and goals.
Legal status and how it interacts with wills and trusts
A family governance letter is usually non‑binding. It expresses intent, not legal obligations. Because of that, it should not contain instructions that contradict your will, trusts, or other legal documents. To align intent and law:
- Review the letter with an estate planning attorney to ensure it complements — not conflicts with — legal instruments.
- Reference your will or trust where appropriate, but do not restate legal distribution formulas in the governance letter.
- If you want certain elements to be enforceable (e.g., a succession plan for a closely held business), work with counsel to draft the appropriate legal agreements.
For related guidance on estate planning for specific asset types (businesses, IP, real estate) see FinHelp’s Estate Planning Checklist for Business Owners: https://finhelp.io/glossary/estate-planning-checklist-for-business-owners/.
Communication and implementation plan
A governance letter is only effective if family members know it exists and accept its principles:
- Share drafts and solicit feedback before finalizing. Hold at least two meetings: one to brainstorm values and one to finalize language.
- Designate an administrator (family council chair, trusted advisor) to distribute updates and manage logistics.
- Link the letter to an estate binder or digital vault (password lists, account access). A practical companion is a digital password vault and executor plan; FinHelp’s guide explains how to set that up for executors: https://finhelp.io/glossary/digital-password-vaults-and-estate-executors-practical-setup/.
Common mistakes to avoid
- Treating the letter as legally binding without consulting counsel.
- Drafting the letter behind closed doors and presenting a finished document for “take it or leave it.” Inclusion increases compliance.
- Overly prescriptive language that leaves no room for future circumstances.
- Ignoring emotional and psychological readiness — include nonfinancial planning like mentorship or financial education for heirs.
When conflicts still arise
Even with a governance letter, disputes can occur. The letter can be used as evidence of intent and a roadmap for resolving disputes, but it may not prevent litigation. Consider:
- Including a pre-dispute mediation agreement in trust or family business documents.
- Building a small discretionary fund to pay for family retreats, education, or dispute resolution — a small amount can reduce financial triggers for arguments.
Checklist before you finalize a governance letter
- Have you drafted a clear mission statement and prioritized no more than 5 core values?
- Did you describe roles and meeting cadence for governance bodies?
- Have you outlined conflict-resolution steps, including neutral third-party mediation?
- Did you review the letter with an estate planning attorney and financial advisor?
- Have you planned for regular review and amendment?
Sources and further reading
- Institute for Preparing Heirs, Family Governance and Wealth Management (2023). (Resource commonly cited by family governance practitioners.)
- Consumer Financial Protection Bureau, guidance on family financial planning and transitions: https://www.consumerfinance.gov/
- American Bar Association — general estate planning resources: https://www.americanbar.org/groups/real_property_trust_estate/
- Internal Revenue Service — estate and gift tax overview (general guidance): https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes
Professional disclaimer
This article is educational and based on generalized professional experience. It is not legal or tax advice. For personalized legal documents or enforceable estate planning, consult a qualified estate planning attorney and your financial advisor.
By documenting shared intentions and practical rules in a family governance letter, families reduce ambiguity and create a stronger framework for passing wealth — and values — to the next generation.
