Now is the time to take the opportunity and consider: What will be the impact on your business, your broader family and individual members if you don’t?
Many clients have spent years growing and investing in their businesses, and family operated businesses comprise 87% of all businesses in Australia; however only 20% have a succession plan in place. This presents an opportunity for you to safeguard your family today and protect your wealth for future generations.
Lessons can be learnt after the business value of ‘Crazy’ John[i] Ilhan was put at risk due to insufficient plans being in place prior to his untimely death. At the other end of the spectrum was Ingvar Kamprad, the founder of IKEA who passed away recently. His wealth had long een the subject of debate although much of it had been transferred decades ago into a complex structure of charitable foundations, partly designed to provide reinvestment back into the company. In an Australian context, the motor racing driver Peter Brock left three Wills and a complex estate that took three years to resolve in the Courts!
As the families of actor and comedian Robin Williams and musician, Prince, have found in recent years, not taking the time to consider your estate plan and a combination of the following may lead to significant amounts of your legacy being eroded in costly delays and legal expenses and further emotional turmoil for your family and beneficiaries.
If any of the following apply to you, the issues outlined above may become significant problems for your family to deal with at an emotional time:
- No Will (or an invalid Will)
- An estate plan that is out of date or doesn’t contemplate, or adequately deal with, control of assets you don’t ‘own’ (trusts including superannuation)
- An inappropriate legal personal representative (executor) or trustee – impartiality, financial and legal skills, availability, and time commitment are all factors to consider
Look towards the horizon
What type of legacy do you want to leave? As none of us know what will happen in the future, how much ‘ruling from the grave’ or control is too much? Should the next generation be given the trust and flexibility to be the decision makers? Using IKEA as an example, will we all want to buy flat pack furniture in future? What flexibility is there in that structure to allow changes to different environments in the future? Is there a documented strategy in place that provides a mechanism for tax efficiently unwinding complex structures that have grown
over an extended time period?
Our recent experience with many clients is that having controls and processes in place is pivotal in maintaining family harmony. This can be achieved by developing a Family Charter as it provides a forum where you can explain your values and family traditions and articulate your vision to develop long term growth in the wealth and strength of the family.
A Family Council, established under your Family Charter can provide a unique environment where family members can discuss their ambitions and expectations and learn to deal with the wealth and the responsibility that comes with it. Would the pain and stress of the Rinehart / Hancock families have been alleviated if such a structure was in place?
Spending time considering the following may assist in helping you shape your legacy:
- Business evolution or succession planning
- Family charters
- Estate planning
- Executors and trustees
- Financial advice and management
Best practice is taking the time now to consider what you want your legacy to be, involving your family in that process and taking action to put plans in place for when you have passed away. We can assist in all of these areas. If you have not already done so, we recommend you commence this process as soon as possible.
1 Williams Group Wealth Consultancy, 2 Australian Bureau of Statistics, 3 Family Business Australia