Keep it in the family – succession planning
25 March 21  /  Insights

The coronavirus pandemic has served as a reminder about the fragility of life and the importance of planning for the future. This is especially important for enterprising families running a family business and is known as succession planning, assuring the future of your business for future generations.

Succession planning and family governance have always formed an essential part of wealth planning, but with the reality of Covid-19 upon us and an ever-increasing death toll, the next generation needs to think about business and estate planning, and the importance of having a secure financial lifestyle plan in place.

For some clients, the current situation presents a reminder to review their financial plan and ensure it still meets business and family requirements. Their wealth may have grown, their children are older and they may now have a different outlook. Others may not have a formalised plan in place. Research* indicates that around 33% of next-generation wealth holders either don’t have a plan, aren’t aware of a plan or are in the process of drafting a plan.

For family members with an ownership stake in the business and involved in its day to day management, it’s essential to have a current and relevant succession plan in place. Not only does it preserve wealth for future generations, but also keeps the business moving forward and reduces the likelihood of future disagreements.

Family governance

All too often, a situation occurs whereby the wealth holder is reluctant to relinquish control, the family is uncomfortable discussing finances or doesn’t know who is qualified and able to take over. In such scenarios, facilitated communication may be the answer, providing a controlled framework for discussion, which is known as family governance.


Successful transference of wealth depends on preparation, with everyone involved taking part and agreeing on a plan for the future. This may take place when those in the next generation are sorting out their own family’s financial plan. It’s then a logical step to involve grandparents and discuss the full picture of the family’s wealth.

It’s important to look at all assets within and outside of the business, and there may well be tax implications of transferring the business to the next generation. Shareholders or board members may also need to give approval.

Equalising assets

If some children aren’t involved in the family business, the succession plan should also look at how best to equalise assets. The larger the family, the more complicated decisions become, making a formal agreement all the more important. For example, two siblings form a business and want to pass it on to their children - one has two children, the other one. Is the business split three ways, 33% to each child, or does each sibling have 50%, in which case one sibling will pass on 25% each to his two children, leaving the other sibling’s child a majority owner with 50%?

Business or succession planning?

People often don’t know the difference between business and succession planning. Business planning is all about the company’s growth, including products and services, while succession planning is about who will take over and when. There are two different aspects to succession planning: ownership structure and management structure, and both need to be accounted for.

Selling up

Another option is to sell the business to a third party, either keeping the family involved or not. This may be more financially advantageous, but for many it’s not about the money, but more about passing on the legacy of the business to future generations. Everyone needs to be very honest about their values and priorities.

Review regularly

A recent report* showed around 44% businesses have succession plans that were established more than five years ago. The rule of thumb is to review regularly, as an outdated plan can be just as problematic as no plan at all. This is particularly important today, with many people reviewing their succession plans in view of coronavirus and the economic downturn. Whether your business is thriving or in difficulty, you need a plan that is relevant, that takes into account other changes such as new taxation policy or divorce in the family. The golden rule is to keep it current and keep everyone in the family up to date.  Before you transfer money, transfer knowledge!

To talk about any of the issues raised in this article, concerning business planning, succession planning or family governance, or to discuss your financial future, current financial plan or desire to implement a financially independent early retirement plan, please call us on 01865 208 000 or email:

*Shaping Tomorrow, Today. Compiled by Camden Wealth, looking at UNW families in the USA, Canada and UK. Download pdf report here.




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