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spring / summer 2017 | aspects of land | 13
HOW TO PASS ON
WEALTH SUCCESSFULLY
n Establish trust and open
communication throughout
the family.
n Identify a family mission
and a strategy to attain it.
n Maintain an honest
assessment of family
assets, including individuals’
strengths and talents.
n Prepare heirs for the
responsibilities of wealth,
even from a young age.
n Draw up a family
constitution to ensure
all stakeholders have
a clear understanding
of expectations and
prospects.
n Ensure that the will
reflects the constitution,
thus avoiding surprises
and grounds for dissent.
IN FIGURES
Typical
succession
of wealth:
100%
1st generation
30%
2nd generation
10%
3rd generation
70%
of wealth
transitions
across
generations end
in failure (i.e. a
loss of assets
and a breakdown
of family
harmony)
60%
of failed wealth
transitions are
due to a lack of
communication
and trust
25%
of failed
transitions are
due to heirs
being ill-prepared
for wealth
1st generation
2nd generation
3rd generation
Most inter-generational wealth transfers do not end in success
A family constitution is a document that states, in
laymen’s language, the family’s objectives and beliefs.
It sets out on what terms wealth is to be inherited; any
expectations on family members; how beneficiaries will
be treated; and what they can expect to receive.
The constitution is not a legal contract, but it can
pre-empt claims of broken promises later. Clive says that
it exorcises the demons that lead to litigation by ensuring
that trust has been established and expectations managed.
And while helping to avoid argument, it can stipulate
how to deal with disputes should they arise.
Family constitutions have existed for decades, but are
relatively recent in the UK. Clive helps clients to write
their constitution, although he stresses that initial values
and priorities should be discussed and decided within the
family, not with an adviser.
“I recommend revisiting the document annually and
continuing to have open conversations as circumstances
and family dynamics change, and getting all stakeholders
to sign up to the constitution,” says Clive.
The final result is that a will, or a letter of wishes,
merely summarises what’s in the constitution. And no
matter what it states, a harmonious family – fulfilled and
content with its lot – is the best legacy of all.
n Clive Beer, London, 020 7877 4724, n Mike
Townsend, Exeter, 01392 455 708,
priorities; managing individuals’ expectations; defining their
obligations; acknowledging their strengths and weaknesses;
and preparing them for wealth. Underpinning this are
agreed priorities governing the family’s wealth, whether
that be conserving, consuming or contributing.
“In short, it’s about defining what you are about as a
family,” says Mike Townsend of Savills Rural Professional
Services. “The starting point is to form a vision of the
future based on family history, personal experiences and
shared values.The way to achieve this is by having honest
discussions in a safe family setting. Open communication
is essential, as is making sure that all family members are
aware of possible problems and solutions.”
This responsibility extends to being clear-sighted about
family members, acknowledging any limitations of character
or ability. It sounds harsh, but if wealth is passed on to
someone unable to cope with it, everyone loses. And while
you’re being frank, consider pre-nuptial and post-nuptial
agreements. “The real value of a pre-nuptial agreement is
intellectual, rather than financial,” says Clive. “They are a
spur to having a grown-up, unromantic discussion about
wealth and setting out expectations and priorities.The
process establishes trust and openness.”
Having done all this groundwork, what should you
do with the trust gained, the information obtained and
the channels of communication opened? That’s where a
family constitution comes in. SOURCE: PREPARING HEIRS: FIVE STEPS TO A SUCCESSFUL TRANSITIONOF FAMILY WEALTH AND VALUES BY ROY WILLIAMS AND VIC PREISSER iSTOCK, VERYAN DALE / ALAMY