Gallo Tries To Help Family Business Succeed

For the last year, Eileen Gallo, Ph.D., has beenworking with a business committee of the American College of Trust and EstateCounsel on a project to increase the success of family business’s being passeddown from one generation to the next. Typically, the largest investment for awealthy client is the family business. Unfortunately, the odds that the familybusiness will be successfully passed down are slim. According to a HarvardBusiness Review article, less than one-third of family businesses are passeddown to a second generation and even less are passed on to a third generation.

To help address this issue, Gallo is co authoring an article called “The Use and Abuse of Incentive Trusts:Improvements and Alternatives,” that coins a new approach to trust draftingthat she claims would “encourage financial literacy through provisions that areclear, objective, and correlated with the beneficiary’s ability to manage moneyresponsibly.” The approach is called Results Oriented Trust Environment, orROTE™. It was developed when the authors were asked to create a trust tomotivate a potential beneficiary to manage money responsibly. The team analyzedboth intrinsic motivation (motivation that comes from within) and externalmotivation (such as rewards or penalty) and found that internal motivationworks far better if the behavioral goal includes being creative, or problemsolving. Gallo has also developed a column dedicated to business skills trustthat will help people become business savvy.

See Eileen Gallo, Investing in Future Generations: Evolution of the Business Skills Trust, Journal of Financial Planning, Jun. 1, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.