Prioritising Succession And Generational Wealth Transition

Succession is often on the minds of wealthy families, but typically it isn’t a priority. Managing investments, running the family business and general everyday matters often supersede any concerns about succession and wealth transition.

More often than not, succession only comes to the fore when there is a change of circumstances, an event or a crisis – such as a marriage, birth, a death in the family, the sale of a business, a stock market crash or, more recently, a global health crisis.

The global pandemic acted as a trigger event, prompting private clients to review their succession plans. It has made us all very aware of our mortality.

The change to tax transparency and heightened geopolitical uncertainty should prompt wealthy individuals to review their succession planning.

Succession and wealth planning typically comes down to one thing – the desire to make sure as much of our wealth passes on to the next generation in the most tax efficient manner. Often this involves financial strategies in various jurisdictions that require a comprehensive, ideally flexible wealth plan and a will in place, to ensure assets are passed to beneficiaries easily with minimal inheritance tax liabilities. The more diverse and sizeable an individual’s assets, and the larger their global footprint, the more complex the picture.

When you start to discuss the finer details of succession planning, it can be extremely complicated and perhaps the reason that many people put it off until something specific happens.

Wealthy individuals recognize the importance of succession and wealth planning and are always considering how best to involve the next generation. For instance in the case of a family business, the next generation may want to pursue different interests and do not want to step into the shoes of their parents, maybe they aren’t ready to take the helm, or their parents are reluctant to choose a successor, this can be for business reasons or the desire to maintain family harmony.

Increasingly, wealthy families are starting to consider drafting a constitution. While it may not be legally binding, it helps to establish key principles for family members, including the next generation. This should be undertaken when family members are working together and are guided by clear purpose and rationale. And not after conflicts arise where tensions run high and family members may be clouded by emotions.

pccwealth.com