Preserving family wealth: exploring the top wealth preservation strategies

Successfully passing family wealth from one generation to the next takes planning and careful strategy.

By Kelly+Partners Team  |  25 Aug 2021

Whether you’ve created your wealth from nothing or you’re the current steward of established family wealth, preserving it for the next generation is likely high on your list of priorities.

Even though it’s true there’s strategies many wealthy families use, every family and every family business is different. And this means the wealth preservation strategies each family uses aren’t always the same.

While we always suggest you seek professional advice from a wealth management expert, here’s some wealth preservation strategies to think about.

Talk to your family about the preservation of their family wealth

An old Chinese proverb says, 'Wealth never survives three generations’

In fact, 90% of families have eroded their wealth by the third generation. Ouch!

Just because you pass your wealth to the next generation, it doesn’t mean they’ve got the business acumen to maintain and build on that wealth. That’s why it’s important to talk to them. Especially if you have a family business. 

With 70 percent of Australian businesses owned by families, and those businesses employing around half of the nation’s workers, the livelihoods of a lot of people are dependent on you talking to your family about family wealth preservation.

Don't wait until the last minute to talk to your family

Unless you’re the Prince of Wales and the entire world knows you’re the heir apparent, it’s never too early to talk to your family about what happens when you either die or want to retire. 

Do you know who has the smarts to run the family business? Do they even want the responsibility? 

Is the family in agreement or will you leave warring kids behind? 

Will the business stay in the family or will it be sold?

All these questions need to be asked and you’ll need time to put plans in place.

Statistics show younger generations are less likely to want to work in, or take over, the family business. With more job opportunities, education and travel on offer, working with mum or dad isn’t the only option for young people these days.

Education

As well as talking to them, educate your children. Higher education such as university is important, but so is an education in the family business. The wisdom of family elders is a time honoured tradition for good reason – it works! 

Teach them the value of hard work. Teach them the value of money. Don’t assume they know or care about it, just because you do.

How often do we read about people squandering inherited fortunes because they lived a life of indulgence, with no concept of the value of money? 

Don’t let this happen to you.

Have a succession plan in place

Handing over the reins of the family business isn’t easy. The children or grandchildren of the rich and successful don’t just spring into business action, instinctively knowing what to do. Plans must be made to decide who’ll take over. And effective small business succession planning takes time.

Not to mention, the person who takes ownership of the business may not actually be managing it. A good succession plan will consider both ownership succession, transferring the capital interest in the business, and management succession, transferring leadership and responsibility for the day to day running and management of the business.

Read all about why having a clear succession plan in place is one of the best things you can do for your business and your family.

Protect your assets

You should think about the long term protection of your assets. 

Why? 

One day, you may find yourself in the middle of a nasty legal dispute with not only your business but your personal assets, such as the family home, on the line. 

One way to protect yourself, your family and your assets is to set up a family trust. A family trust separates a person from their assets. It’s very useful in protecting:

  • those too young to handle their own financial affairs
  • incapacitated or vulnerable people 
  • people who may squander the family fortune 
  • against potential legal or financial liability.

As well as control and protection, there’s also some tax benefits. And who doesn’t love a tax break?

Wealth preservation isn’t only for the super-rich or big business

You might be thinking that preserving family wealth is the domain of the super-rich or famous. Nothing could be further from the truth. If you have wealth to transfer from one generation to the next, it applies to you.

Whether you own a small business, a family home or have a bit of money invested, it’s family wealth and you’ll want to pass it on to the next generation. Known as intergenerational estate planning, it can be as easy as a will or as complex as your investment portfolio or business requires. Just a few of the ways wealth is transferred to the next generation include:

  • Wills
  • Estate planning
  • Superannuation
  • Investment bonds
  • Property
  • Life insurance
  • Shares
  • Trust funds.

Invest in proper financial planning 

It doesn’t matter how much or how little wealth you have, a good financial advisor or wealth management expert will make sure you’re doing the very best to preserve your family wealth. They can advise you on taxes, investments, shares, property and everything in between. They can help:

A good relationship with a financial planner, just like your wealth, can be preserved for the next generation. They can prove an invaluable resource when it comes to the seamless transition from one person to the next. 

At Kelly+Partners, if you’re thinking about the preservation of your family wealth, we actively encourage you to bring in the next generation to discuss wealth management. For more information, get in contact with your Client Director today.

 

This offer for Private Wealth Services is not available to clients of BMF as at 31 December 2016.


DISCLAIMER

Kelly Partners Private Wealth (Wholesale) Pty Ltd is a corporate authorised representative of Kelly Partners Private Wealth Pty ltd (AFSL: 516704, ABN 14 629 559 860). Any general advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice with regard to your objectives, financial situation and needs.

Kelly Partners Private Wealth Sydney Pty Ltd is a corporate authorised representative of Madison Financial Group Pty Ltd (AFSL: 246679, ABN: 36 002 459 001)

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