26 September 2018

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 Wadsworth is a Chartered Financial Planner at Carbon. Contact Richard via email on or get in touch with your local office.

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

Tax and Estate Planning Services are not regulated by the Financial Conduct Authority.

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