Allocating Wealth In Family Business Succession

Dr Richard Shrapnel PhD
2 min readJun 7, 2024

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Photography By Nathan Dumlao On Unsplash.com

‘Equality Is Not Equal’ — Guiding Principle Six Family Business Succession.

If your succession process involves active wealth transfer (an active business or interest therein), then achieving equity across generational lines (where there is more than one family involved, or if some family members have worked in the business and some have not), may well be a challenge.

This challenge is common within any family who faces these circumstances, so you are not alone. It is however also a key barrier to successful succession and one which must be carefully addressed if the next generation is going to continue to build upon the generational wealth they will receive.

The question is principally: “What is fair and equitable?” but also, “How do we achieve harmony?”

This will require you to:

  • Involve all family members that your decision may impact early in the process.
  • Establish, explain and seek contribution to the basis/principles/values upon which you will make your decisions.
  • Determine the impact that your decision may have on individual family members and discuss this with them.
  • Keep everyone informed and maintain an open dialogue.
  • Make sure you engage with and include your spouse in these discussions (they will be one of your most important advisors).
  • Make a decision that is fair and clearly communicate your decision with reasoning.

And while keeping harmony at the forefront, do not compromise the principles of equity that you have established simply to keep someone quiet or happy.

In deciding how your wealth may be allocated in the future and, at the same time, seeking an outcome that will underpin and support family harmony around those decisions can be a real challenge if not approached correctly. It’s one of those cases where that strange expression ‘process is your friend’ can be so true. It is also an area where undertaking the Family Charter process can be an excellent starting process.

There needs to be a basis for equity and fairness and if you start with the dollars and allocations then you will struggle. Set out what you believe are the principles that should be applied in allocating entitlement without any figures attached.

Your guiding principle is that equality does not mean equal, rather you must seek to be fair based on the historical and future contribution (including risk) that family members have made and will be expected to make.

Here are two brief video clips that speak into this area:

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