A family business’s ethos is ingrained in the next generation from a very young age. However, the patriarch’s unrelated investments often are foreign to them – rarely discussed or understood. Without careful records and a focus on education and transition planning relating to these noncore holdings, they can become unexpected liabilities.

Consider the example of a Midwest investor who built an investment portfolio comprising over 50 private companies during a 35-year career. Upon his sudden passing, his heirs were left with no consolidated record of holdings, no register of ownership percentages, past tax filings, or history of distributions. Tax filings were delayed, votes were missed, and partnership terms misunderstood—the result: value at risk simply due to a lack of structure and the requisite planning.

This is not an isolated incident. When former Zappos CEO Tony Hsieh died in 2020, his over $500M estate also lacked organization—leaving his family to rely instead on thousands of sticky notes (although, eventually, his 2015 will surfaced).¹ In a PwC survey, 52% of family business leaders admitted they had no documented succession plan in place.² The percentages are likely much higher for alternative asset holdings unrelated to the family business. “You think you have time,” one family office advisor said. “But the problem shows up the moment someone dies or becomes incapacitated, and that’s when the portfolio needs the most attention.”

Private Investments Pose Special Challenges

Unlike publicly traded assets, direct private investments require ongoing oversight and fast decision-making, especially during a generational handoff. Capital calls, maturity extensions, shareholder votes, and regulatory filings don’t wait for probate. Without a system in place, next-generation family members face both financial exposure and reputational risk.

According to a 2023 Northern Trust study, nearly 60% of ultra-high-net-worth families lack an up-to-date inventory of their private investments. The result: “delays in estate execution, impaired asset values, and avoidable tax consequences.”³

Equally important, the rationale behind many holdings—why a patriarch invested in a given industry, company, or strategy—is often undocumented, making it difficult for heirs to evaluate whether to hold, divest, or double down.

A Centralized Platform Provides Structure

Perhaps the best solution is structural: an integrated tracking system designed to give family members and advisors a clear line of sight into their private investment portfolios.

Such a platform should include:

• Investment tracking: Capital commitments, issuer updates, investment documents, statements, and distribution schedules
• Tax documentation: Consolidated K-1s, capital gains, and cost basis records
• Decision authority: Verified signatories and internal voting protocols
• Regulatory alignment: Safeguards SEC and IRS compliance, particularly during estate transitions
• M&A readiness: Organized documentation to support exits or recapitalizations

These systems can be modeled after institutional-grade solutions. For instance, Carofin, a FINRA-member broker-dealer, has developed a proprietary platform, perfected over many years of development to address the needs of their own private investors customers, allowing the firm to effectively monitor an ever growing list of portfolio companies—capturing documentation, ownership, cash flow history and reporting history—to ensure accurate and speedy data retrieval and analysis.

Education is Needed to Prepare the Next Gens

A digital hub, while essential, is but one part of the solution. Families are best served by pairing infrastructure with education. Regular reviews, supported by the tracking portal, can walk Next Gens through investment theses, sector exposure, and historical returns relatively quickly, affording context and continuity for the decisions to come.

In a 2022 Campden Wealth report, only 39% of next-generation family members reported feeling “prepared” to take over management of their family’s private investment portfolio.⁴

Using actual portfolio examples (e.g., the choice to back a precision manufacturing firm instead of a retail chain) enables heirs to learn decision-making frameworks and risk assessment. It also builds trust in the founder’s vision and creates a culture more attuned to private investing.

This Blueprint Enhances Better Outcomes

Wealth transfer is not just about asset preservation—it’s also about sustaining an investment philosophy across generations. A well-organized, transparent system allows heirs to take control confidently and make decisions grounded in data, intent, and purpose.

Unfortunately, the cost of inaction can be significant—both financially and emotionally. By institutionalizing private investment management, families can ensure their legacy is based on clarity and conviction, not defined by confusion.

Sources

1. The Wall Street Journal, “Tony Hsieh Left No Will—His Family Is Sorting Through Sticky Notes,” Feb 2021
2. PwC Family Business Survey, 2021, Global Family Business Report
3. Northern Trust, “Managing Complexity in Family Wealth,”
4. 2023 Campden Wealth, “North American Family Office Report,” 2022