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Personal & Family Wealth Accounting

Updated: Jun 21, 2023

People that have money, want to grow their money! The issue they face is that many have personal or family wealth, but do not have the accounting in place to actually help them understand their financial makeup. This understanding is used to make the decisions needed to grow the wealth. Personal & family wealth accounting should serve as a great tool for the wealthy. The accounting can be complicated but is always interesting because it can take on as many forms as there are ways to make money!

In my accounting career, I have had the privilege to work for 3 families that have extensive wealth. The Weyerhaeuser Family was my first exposure to accounting for a wealthy family. I was 1 of 8 accountants that managed a section of the family's financial accounting. From lumber businesses to owned real estate, the accounting was a massive system to monitor and manage the wealth of the family. I have also worked many years for 2 other families (names are not public information) that were not as wealthy as the Weyerhaeuser Family, but none of us would complain about having their financial positions in life. Those families were more diversified in terms of where their money was invested to generate profits. The point I am making is that a family that has a good accountant on board, will have the financial information needed to understand all these potential arms of income.

What is the purpose of personal or family wealth accounting? Ultimately, did the assets grow over liabilities and, did the person or family's expenses stay within the income structure? The accountant should be providing a monthly analysis answering these exact questions. That is, if they have an accounting department or professional accounting service in place to manage the information in a way that serves them. The awesome thing today is that all of this can be done remotely so solid connections between those that have assets like this and the accountant, can be developed even further than traditional means. Not to mention the efficiency that has happened in accounting with the movement into technology.

From an accounting nerd standpoint, what I like to do is adjust market values on the Balance Sheet to account for changes in the market. Since wealth accounting is not fully used for tax accounting, one can be creative with how some of the monies are represented on the Financial Statements. For example, if an individual owns several pieces of real estate, those assets can be assessed an unrealized gain or loss based on what the market is doing. This gives the user of the information a real sense of where their true net worth is currently at.

I think the biggest part of the personal & family wealth accounting equation is the relationship between the person or family, and the accountant(s). The most important part of that relationship, in my opinion, is trust. As the accountant, you need to be a person of impeccable integrity and honesty. People that are wealthy tend to be highly intelligent people meaning, they can sniff out someone that is not a good piece to add to their financial puzzle. Therefore, the accountant(s) need to be people that you would trust with your new born child as that person has access to highly sensitive information.

The cool thing about being the person that may be looking for an accounting relationship to manage the information regarding your wealth, you can co-create, with the accountant, how you want your information presented. This will allow you to zero in on your most important income generating assets!

To learn more about how Blue Collar CFO can help you with developing an accounting process to manage your financial information, feel free to contact us.

Blue Collar CFO


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