Encouraging Families to Implement a Family Risk Management Policy (Part One)

Families have faced risks to their wealth and family cohesiveness since this country began. Traditional risks have Family Imageincluded

  • the unexpected death or disability of key stakeholders;
  • incomplete or out of date estate planning documents;
  • incomplete or out of date corporate documents;
  • the lack of liquidity;
  • the lack of a disaster plan;
  • the lack of effective communication among key stakeholders;
  • major changes in the competitive environment;
  • the divorce or remarriage of a key stakeholder;
  • out of date business valuations;
  • the absence of an effective family governance policy; and
  • the lack of an awareness of the boundaries between family and business.

In addition to these traditional risks, families now face new risks including

  • the lack of privacy in the Google world;
  • cyber-attacks;
  • social media risk to family reputation;
  • global dispersion of family members and its impact on effective communication;
  • new attacks on  business valuation; pre-nuptial agreements and post-nuptial agreements;
  • complex alimony calculations (taking phantom income into account);
  • the baby boomer transfer of wealth;
  • the speed of innovation;
  • the impact of the increased working lifespan of the senior generation on succeeding generations; and
  • the very turbulent economic times.

All these risks should be discussed and thought through and a family risk management policy statement developed.

A family policy statement is an agreed-upon guideline that family members have developed amongst themselves in collaboration with the family’s most trusted advisors.  The family chooses to agree to follow the policy to protect the family’s wealth and increase their chances of sustaining wealth while preserving family policy. (Common areas of family policy development include decision-making, confidentiality, code of conduct, conflict resolution, education, employment, family risk management, medical, philanthropy, travel, trust distribution and vacation properties.)

This presentation will focus on a family risk management policy statement. A family risk management policy statement should be put in place to soften the blow and manage the impact of the risks to the family’s wealth.

Following the guidelines of the family risk management policy statement will increase the chances that the family can protect and sustain its wealth and preserve family harmony for generations to come.

This presentation will address the following areas that are “at risk”:

Family Cohesiveness:

Business Ownership (whether formal business ownership or ownership of jointly owned investment/business assets); and Wealth Management.

I. New Risks to Family Cohesiveness:

A. Damage to the Family Reputation or Family Brand:

In the area of family cohesiveness, the family’s reputation or the family brand is at risk. Traditionally this risk was triggered by a scandal that leaked out to the press. The new way this risk is triggered is through social media.

To date, Facebook has approximately 1 billion users, and on any given day 50% of those users are online. Many of our children and grandchildren are spending an increasing amount of time living, working and playing online – sometimes with the wrong people.

One click of the button, one Facebook page or one YouTube vignette can go viral instantly and affect the family’s reputation and brand. It can be used in divorce actions, custody matters, and employment decisions. Once viral, it is hard to eradicate. Social media is discoverable in litigation. Social networking sites are investigative tools that give the lawyers information that will lead to the evidence they need to present in a trial. Information gathered from social network s can be used to attack credibility, discover relevant character evidence, dispute damages, determine or rebut state of mind, and identify witnesses.

Facebook was used to show that the teenage driver who killed her best friend in a car accident was a party girl who drank heavily. Posts and pictures of her in many party situations abounded.

In divorce and child custody cases investigators look to confessions- things that people have done, places they have been and people they have had their children around.  People post revealing pictures and video on the Internet that they would never share in the day to day world.

As an example, there is a Facebook group titled, “I hate my Ex???” The group was created for “everyone who hates their ex-boyfriends or girlfriends or ex-husband or ex-wife.” Actual posts on that Facebook page include the following:

“I hate my ex-husband wish he wasn’t the father of my kid so he could be out of my life for good!!!”

“My daughter hates my ex, her father, and the courts say she has to visit him. He gets her all this week for vacation.”

“My ex should die a slow painful death for what he put us through”

“I hope my ex gets herpes”

In Georgia, the Court of Appeals reviewed posts such as those (High v. High, 389 S.E.2d 690, 2010) and admitted into evidence posts on the issue of the father’s suitability to have custody of the minor children.  The court commented that it was disturbed by the statements contained in the father’s MySpace page where he wrote “I’m actually a little sorry for [mother] just because losing her job affects my children. Well, maybe not. Now I’m financially more than able to support [the kids] if [mother] gets out of the way or is pushed out.” Relying on these posts the court observed the father’s hostility, animosity and anger toward the mother and awarded the mother sole custody.

In Ohio, The Court of Appeals affirmed a lower court decision to consider text and picture posts on a mother’s MySpace page (Williams v. Gonzales, 2010 WL 3365741). The maternal grandmother filed a third-party motion to modify custody of the mother’s children. The grandmother put forth evidence that the mother maintained a MySpace page under the name “Sexy Nurse Williams.” The mother posted pictures of her children that one expert called an “oral aura” in a slideshow with two sexually explicit graphics. The grandmother’s expert on social media and expert on risks to children regarding sexual matters testified that the pictures were displayed in a “sexualized manner” and created a “pedophile’s dream.” When these facts were taken into consideration the trial court found that a change of circumstances had occurred and modified the custody order.

In Indiana the Court of Appeals affirmed a lower court’s decision to consider the MySpace posts of one mother who mocked her children and their allegations that the mother’s boyfriend has been physically abusive to them. (In the matter of the Paternity of P.R. and A.R. 2010 WL 538476). The father petitioned the court to modify custody and support. The court, after reviewing the mother’s MySpace page and the allegations she made that mocked her own children for statements they made about her boyfriend who had one felony conviction for battery on a minor under the age of fourteen, awarded sole custody to the father.

With sites such as Facebook and MySpace, the user can instantly download pictures and videos. People now have the ability to do that for themselves, and even scarier, others have the ability to post that information about you and post it to their profiles without your knowledge.

As an example, the Ohio Court of Appeals in In re N.F. (2009 WL 1798146) the mother’s boyfriend (an exotic dancer) posted pornographic pictures on the mother’s MySpace page. These pictures were easily accessible. The court took custody away from the mother, ruling that even though she had demonstrated the ability to care for her children, work two jobs, provide financial support and strive for her GED degree, her home and personal life was chaotic and problematic.

In Michigan, Copeland v. Mitchell (August 5, 2010 Docket No. 290381) the Court of Appeals awarded the father full custody after considering pictures of the children posted to the mother’s MySpace page showing the girls without blouses.  The court also ordered the mother to immediately remove the pictures.

What you say about yourself and what others say about your also effects hiring decisions. Today employers surf the web to learn as much about candidates as they can. The employer is looking not only to see what is negative about you- but also what your personality and interests are. It gives clues as to your work ethic and your drive. It also provides cultural clues and a guideline for the chemistry you or may or may not have with your potential coworkers.

If you have a family business and/or an important position in a business, what is said about you in social media can impact the brand and your reputation. As Warren Buffet said, it takes 20 years to build a reputation and five minutes to ruin it. Recent examples include Urban Outfitters- a small jewelry producer on Etsy.com discovered that Urban Outfitters copied her work and was using similar language to market it. This story spread rapidly through the social networking sites of craft enthusiasts and rapidly worked into negative publicity.  Another example involved Bob Parsons, the founder and CEO of godaddy.com who blogged and tweeted a photo of himself shooting an elephant while on vacation in Zimbabwe. The video shows the elephant being stripped for meat. Animal rights activist, including PETA closed their GoDaddy accounts and through social media encouraged others to do so too.

The use of social media can also lead to risks of physical security. In April 2011 Ivan Kaspersky, the college student son of the multi-millionaire founder of a Russian company, Kaspersky Software, was kidnapped while en route to class and held for five days. When his captors were debriefed they revealed he was targeted due to the combination of his father’s wealth and the readily detailed information about his routine and his family posted by him in a social media site.

Penske- Nantucket

Prince Harry Strip poker Las Vegas

If you employ household staff institute rules concerning their use of family computers and internet access.

You should take steps to make sure that all computers and internet devices have up to date protections such as screen locks, remote tracking and date destruction capabilities (in case of loss).

Today the “digital footprint” you leave may last for a very long time. Wikipedia defines this: In social media, a digital footprint is the size of an individual’s online presence, as it relates to the number of individuals with whom they interact.” This footprint evolves as you post items about yourself and as other’s post items about you. The younger generation, if not educated, is not mature enough to understand the afterlife omnipresent power of the digital era and the “digital footprint they are leaving”.

It may be true that the concept of internet privacy does not exist. Scott McNealy, cofounder of Sun Microsystems said more than 13 years ago- “You have zero privacy anyway. Get over it”.

No matter whether he is right or wrong, education of the risks of the lack of internet privacy and the power of the digital footprint will mitigate the issue.

A strong family risk management policy should include education about the dangers of social media and a morally binding decision among family members to understand the consequence of social media on the reputation of the entire family.


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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