You’d like to pass on your business or leave your wealth to your family. What comes next is knowing the steps you need to take to transition successfully. Here we cover three key areas that you should consider when planning the succession of your business and your wealth:
- Starting point: What are you looking to achieve?
- Future decision makers: Who would you like to carry out your ambitions
- Talking the talk: Sharing your plans with those affected
What are you looking to achieve?
There are many potential objectives you may have in mind for your wealth or your business. Every individual and every family is different. Our experience shows that if you focus first on what you want to achieve both for your wealth and your business, it can be more straight forward to implement your wealth succession plan. The following are some common considerations that we see when helping our clients:
Who are you considering as part of your wealth plan?
Entrepreneurs should consider who they would like to benefit from their wealth. For example, perhaps you would like to have provisions in place for several generations that come after you, or perhaps you want to empower your next-in-line generation to take those decisions in their own way. You may want future generations to completely carve their own path separate from the family business and wealth you have created, and are looking to distribute your entire wealth to charitable causes.
What do you see for the future of your business?
If you are a business owner, is your goal to see your business thrive under your future family? Or would you be happy to sell and the resulting wealth is grown and preserved for and by generations to come? Start to consider how you would like your business to support your family or how your family will develop your business in future.
Do you have passions or interests that you want to consider with your wealth plan?
Your adviser can present a range of possible options, including solutions such as strategic philanthropy advice and charitable administration, or values-aligned investing, to help you transform your passion into a defined purpose and achieve your philanthropic ambitions.
When do you want to pass on your wealth or your business?
Knowing what you want your wealth to achieve no longer has to be the end of your part in the story. Seeing the results of wealth transfer within a lifetime is becoming more of an expectation for many entrepreneurs. Timing is no longer dictated simply by age. You can determine when you want to pass on your wealth or your business while you are still playing an active part in their development. Advice from HSBC can help determine the right timing for you and your family.
Read more on where to start with wealth planning here
Who would you like to carry out your ambitions
There are several reasons to consider who the right decision makers will be for the family wealth or business. It is important to be guided by your long term objectives or purpose, which will enable you to identify the decisions you need to make.
An even split across each person within the family may feel like the fairest way forward. However in some circumstances, sharing wealth equally amongst siblings, children and beyond, can cause resentment complications and dilution of wealth. It might be that some have made a larger contribution to growing the business or assets or have qualifications that add a much-needed skillset.
Similarly, sharing control over a company, and creating multiple leaders, may lead to a lack of cohesion and direction. It may not make sense to liquidate an entire estate just to keep things equal amongst those who are inheriting. Some things can’t be split and joint leadership may not make sense in some circumstances (e.g. businesses and real estate). Again is it about remembering what positive outcomes you want to achieve with your wealth for the long term, rather than what may be the automatic, expected or easiest option today.
As families grow and become more complex, you’ll need to be ready to make potentially challenging decisions. Being clear about who manages and benefits from the family business and wealth can help support growth both today and into the future.
Who are the right leaders for the business or the family wealth? Here are some considerations to think about:
Expertise
You may have originally intended that your children take control of the business or family wealth. As families adapt and grow, you may feel that there is someone else more suited for the role, or that external non-family expertise is the right fit. If external expertise is brought in, don’t forget to consider who in your family will oversee them.
Assumptions
It is important to check any assumptions you may have around family members desires. It is more common than most people realise for families not to discuss their individual goals with each other. Being clear on what you expect can prevent complications later.
Ambitions
Some family members may be passionate about following their own endeavours and are perhaps not interested in a high involvement role in managing family wealth. Having open conversations now can protect your wealth and business in future.
Hierarchies
Recognising that there are personal and business hierarchies and discussing these early on should help prevent surprises. For example, if you want for your daughter to lead the family business, but aunts and uncles will still be involved, being crystal clear on who will be the ultimate decision makers can help create the best chance of future success. Your family will still be affected by the transition, but providing them with solutions within a transparent plan will bring peace of mind and keep your vision and legacy in place.
Recognition
Should all of your children have equal involvement and entitlement? Or do you want to recognise those individuals who will be more directly building a successful future? Or perhaps you want them to make their own way, create their own success in life. Families can be complicated, so recognising this and creating a governance structure that acknowledges these different dynamics can pave the way towards family unity in the future, without anyone feeling like others are getting a free ride.
Just like a business, leadership and governance are needed for your wealth strategy to succeed. Being explicit about what level of participation you would like the next generation to have is crucial, and provides clarity to everyone. Once you know who and how much control these individuals will have, consider what education they may need to ensure they are ready to become involved or take over in you planned timeline.
Sharing your plans with those affected
When it comes to succession few entrepreneurs want to have the ‘talk’. But having an open conversation about your wishes, is your chance to explain to your family what you’re doing and, more importantly, why. Avoiding a conversation with your family about wealth, inheritance and business succession can lead to confusion and insecurity, but starting early can make things much easier.
Here are some practical actions that can help with this discussion.
Explaining the why
As a wealth creator one of the best ways to begin these conversations is by sharing the family history i.e. how the wealth was created, and your vision for the business and wealth.
Timing
Choosing the right time to have these discussions can at first feel daunting. Remember, you don’t need to discuss everything in one single sitting. Try putting in a regular time, perhaps once a month to start with over dinner. You will need to make some big decisions and you will need to formally document this information. But these can be positive conversations about what you will achieve together as a family especially as the family continues to grow. Making it a family gathering will help remove the sense of discussing money as a taboo subject. Plus, regular catch ups can help iron out smaller questions that would not often be considered and prevent misunderstandings.
Who
Families have never been clear cut. There are partners and children to consider of course. But aunts and uncles, or your siblings, could already be involved in the family business, or have a sense of duty to support future generations when you are no longer around. Perhaps you have stepchildren to consider in either your wealth or business. They may even have the expertise that best places them to take the lead. Or perhaps you have long term employees who are essential to the business and are like family. Long term employees who are vital to the longer term business success should be involved in discussions, and could be the perfect fit for the business succession. You may want to consider their futures and their overall involvement.
Additionally, how far does the word family reach for you? For example further down the generations, have you considered your grandson’s wife? Map out your family and who you consider as main and secondary beneficiaries. Preventing small cracks now and being clear on who is to benefit from the family business and wealth, can help prevent family fractures later.
Open dialogue
Provide a space where everyone can both share their thoughts and listen to others in the room. You don’t have to agree with everything said but its important to give everyone to the opportunity to speak.
Adaptability
Create flexibility that allows future generations to incorporate their values. Plans can adapt and evolve over time to fit the new needs of the family.
Be prepared
Are those you have selected ready for this challenge? Consider what education may be needed for future generations to build their skillset ie financial literacy, family legacy, business structure etc.
Ask for help from a facilitator
At HSBC we have a full spectrum of experience working with families from those who are all clear on the future wealth path, those who are experiencing some difficulties. Outside advisors can help facilitate discussions through family governance meetings, especially if you are concerned discussions will veer off course or may become heated. Understanding your family dynamics today and focusing on what you want your wealth to achieve in the long term will support better outcomes for tomorrow. Additionally, bringing in outside experts can help determine what’s needed without the emotional ties. It can also help to make all family members feel included.
If you don’t want to have these discussions
For many business owners and wealthy families, transferring wealth and control needs more than just a will. You need a way too. It might not mean physically talking to your beneficiaries but we always recommend getting a basic level of structure in place to protect your wealth for the future.
Want to discuss further? Reach out to us today
What are you looking to achieve?
There are many potential objectives you may have in mind for your wealth or your business. Every individual and every family is different. Our experience shows that if you focus first on what you want to achieve both for your wealth and your business, it can be more straight forward to implement your wealth succession plan. The following are some common considerations that we see when helping our clients:
Who are you considering as part of your wealth plan?
Entrepreneurs should consider who they would like to benefit from their wealth. For example, perhaps you would like to have provisions in place for several generations that come after you, or perhaps you want to empower your next-in-line generation to take those decisions in their own way. You may want future generations to completely carve their own path separate from the family business and wealth you have created, and are looking to distribute your entire wealth to charitable causes.
What do you see for the future of your business?
If you are a business owner, is your goal to see your business thrive under your future family? Or would you be happy to sell and the resulting wealth is grown and preserved for and by generations to come? Start to consider how you would like your business to support your family or how your family will develop your business in future.
Do you have passions or interests that you want to consider with your wealth plan?
Your adviser can present a range of possible options, including solutions such as strategic philanthropy advice and charitable administration, or values-aligned investing, to help you transform your passion into a defined purpose and achieve your philanthropic ambitions.
When do you want to pass on your wealth or your business?
Knowing what you want your wealth to achieve no longer has to be the end of your part in the story. Seeing the results of wealth transfer within a lifetime is becoming more of an expectation for many entrepreneurs. Timing is no longer dictated simply by age. You can determine when you want to pass on your wealth or your business while you are still playing an active part in their development. Advice from HSBC can help determine the right timing for you and your family.
Read more on where to start with wealth planning here
Who would you like to carry out your ambitions
There are several reasons to consider who the right decision makers will be for the family wealth or business. It is important to be guided by your long term objectives or purpose, which will enable you to identify the decisions you need to make.
An even split across each person within the family may feel like the fairest way forward. However in some circumstances, sharing wealth equally amongst siblings, children and beyond, can cause resentment complications and dilution of wealth. It might be that some have made a larger contribution to growing the business or assets or have qualifications that add a much-needed skillset.
Similarly, sharing control over a company, and creating multiple leaders, may lead to a lack of cohesion and direction. It may not make sense to liquidate an entire estate just to keep things equal amongst those who are inheriting. Some things can’t be split and joint leadership may not make sense in some circumstances (e.g. businesses and real estate). Again is it about remembering what positive outcomes you want to achieve with your wealth for the long term, rather than what may be the automatic, expected or easiest option today.
As families grow and become more complex, you’ll need to be ready to make potentially challenging decisions. Being clear about who manages and benefits from the family business and wealth can help support growth both today and into the future.
Who are the right leaders for the business or the family wealth? Here are some considerations to think about:
Expertise
You may have originally intended that your children take control of the business or family wealth. As families adapt and grow, you may feel that there is someone else more suited for the role, or that external non-family expertise is the right fit. If external expertise is brought in, don’t forget to consider who in your family will oversee them.
Assumptions
It is important to check any assumptions you may have around family members desires. It is more common than most people realise for families not to discuss their individual goals with each other. Being clear on what you expect can prevent complications later.
Ambitions
Some family members may be passionate about following their own endeavours and are perhaps not interested in a high involvement role in managing family wealth. Having open conversations now can protect your wealth and business in future.
Hierarchies
Recognising that there are personal and business hierarchies and discussing these early on should help prevent surprises. For example, if you want for your daughter to lead the family business, but aunts and uncles will still be involved, being crystal clear on who will be the ultimate decision makers can help create the best chance of future success. Your family will still be affected by the transition, but providing them with solutions within a transparent plan will bring peace of mind and keep your vision and legacy in place.
Recognition
Should all of your children have equal involvement and entitlement? Or do you want to recognise those individuals who will be more directly building a successful future? Or perhaps you want them to make their own way, create their own success in life. Families can be complicated, so recognising this and creating a governance structure that acknowledges these different dynamics can pave the way towards family unity in the future, without anyone feeling like others are getting a free ride.
Just like a business, leadership and governance are needed for your wealth strategy to succeed. Being explicit about what level of participation you would like the next generation to have is crucial, and provides clarity to everyone. Once you know who and how much control these individuals will have, consider what education they may need to ensure they are ready to become involved or take over in you planned timeline.
Sharing your plans with those affected
When it comes to succession few entrepreneurs want to have the ‘talk’. But having an open conversation about your wishes, is your chance to explain to your family what you’re doing and, more importantly, why. Avoiding a conversation with your family about wealth, inheritance and business succession can lead to confusion and insecurity, but starting early can make things much easier.
Here are some practical actions that can help with this discussion.
Explaining the why
As a wealth creator one of the best ways to begin these conversations is by sharing the family history i.e. how the wealth was created, and your vision for the business and wealth.
Timing
Choosing the right time to have these discussions can at first feel daunting. Remember, you don’t need to discuss everything in one single sitting. Try putting in a regular time, perhaps once a month to start with over dinner. You will need to make some big decisions and you will need to formally document this information. But these can be positive conversations about what you will achieve together as a family especially as the family continues to grow. Making it a family gathering will help remove the sense of discussing money as a taboo subject. Plus, regular catch ups can help iron out smaller questions that would not often be considered and prevent misunderstandings.
Who
Families have never been clear cut. There are partners and children to consider of course. But aunts and uncles, or your siblings, could already be involved in the family business, or have a sense of duty to support future generations when you are no longer around. Perhaps you have stepchildren to consider in either your wealth or business. They may even have the expertise that best places them to take the lead. Or perhaps you have long term employees who are essential to the business and are like family. Long term employees who are vital to the longer term business success should be involved in discussions, and could be the perfect fit for the business succession. You may want to consider their futures and their overall involvement.
Additionally, how far does the word family reach for you? For example further down the generations, have you considered your grandson’s wife? Map out your family and who you consider as main and secondary beneficiaries. Preventing small cracks now and being clear on who is to benefit from the family business and wealth, can help prevent family fractures later.
Open dialogue
Provide a space where everyone can both share their thoughts and listen to others in the room. You don’t have to agree with everything said but its important to give everyone to the opportunity to speak.
Adaptability
Create flexibility that allows future generations to incorporate their values. Plans can adapt and evolve over time to fit the new needs of the family.
Be prepared
Are those you have selected ready for this challenge? Consider what education may be needed for future generations to build their skillset ie financial literacy, family legacy, business structure etc.
Ask for help from a facilitator
At HSBC we have a full spectrum of experience working with families from those who are all clear on the future wealth path, those who are experiencing some difficulties. Outside advisors can help facilitate discussions through family governance meetings, especially if you are concerned discussions will veer off course or may become heated. Understanding your family dynamics today and focusing on what you want your wealth to achieve in the long term will support better outcomes for tomorrow. Additionally, bringing in outside experts can help determine what’s needed without the emotional ties. It can also help to make all family members feel included.
If you don’t want to have these discussions
For many business owners and wealthy families, transferring wealth and control needs more than just a will. You need a way too. It might not mean physically talking to your beneficiaries but we always recommend getting a basic level of structure in place to protect your wealth for the future.
Want to discuss further? Reach out to us today
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