27 February 2015

Passing wealth to the next generation... Throw in the family business

If you think that passing on wealth through your family is complicated enough, try throwing in a family business as well. The issues are even more complicated when a family business is involved, with more emotional attachment tied-up in the business itself. We regularly hear the view:

“You think of your company as your own baby. You hate to think of someone buying it and then the name is gone”.

Many want to retain the business to provide the next generation with income as well as seeing the business live on. By holding the company in a trust, they can organise matters so that it gives the family “the ability to enjoy the good life”, as one client explained, while ownership is “retained by those who operate the business.” It is clearly important in these cases that control is concentrated in the hands of those most dedicated to preserving the family values.

Keep it out the family

Warren Buffett, investor extraordinaire, takes a much more objective approach. He suggests that proprietors should forget trying to attempt to keep the management of their beloved companies in the family:

“Would anyone say the best way to pick a championship Olympic team is to select the sons and daughters of those who won 20 years ago? Giving someone a favoured position just because his old man accomplished something is a crazy way for a society to compete”.

Perhaps the most relaxed approached I have come across, and it’s one that has been expressed on more than one occasion, is along the lines of:

“I’m not going to worry about the children, or do any estate planning except the very basics. The kids will get what’s left when I die, and whatever that is, net of 40% Inheritance Tax, it will be more than I started with!”

But there is a middle ground. Join me in my next blog to hear more about striking a happy balance and pick up the first of our ‘top tips’ for those looking to pass wealth on down the generations.

Richard is a Chartered financial planner, Certified financial planner, Fellow of the Personal Finance Society, Fellow of the Institute of Financial Planning, and Affiliate of the Society of Trust and Estate Planning. He works with clients in Scotland and in London and has particular expertise in helping individuals and families pass wealth down the generations. View Richard’s profile here.

If you would like to discuss your financial planning options, please contact us with any questions you might have. You can do this by calling our head office on 0131 220 0000, or by emailing us at or you can also follow us on Facebook, Twitter or LinkedIn.

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