Inheriting the Future: How to set up the next generation to succeed

According to the Productivity Commission, inheritances and gifts have more than doubled since 2002 and could rise four-fold in real terms between now and 2050. That’s an estimated $3.5 trillion dollars changing hands between now and 2050!

This transfer of wealth will have wide reaching implications for those inheriting this wealth, those leaving it behind, their businesses and the economy in general. In fact, this transfer of wealth could have a profound impact on Australia and what it looks like over the rest of this century and beyond.

As there are a high proportion of family businesses in the hire industry, the subject of wealth transfer aligns closely with the businesses succession planning.

With that in mind, what may this future look like?

T he great wealth transfer may sound like a windfall, and it is for many, but it also carries the burden of responsibility. The incoming generation will have a responsibility to their family, any businesses that they control and those that rely on them to not ‘stuff it up’.

This may mean that they will feel the obligation to carry on a family business, even it is not what they enjoy doing — and the responsibility to not squander any wealth that has been passed to them.

This great wealth transfer comes at a time of uncertainty. There is uncertainty about how the ageing population will impact our societies, how artificial intelligence will change the nature of work, how climate change will impact our lives and uncertainty about future conflicts between global superpowers.

Indeed, it’s difficult to make precise predictions about what this all means and what the future holds, but these trends are likely to shape the future of Australia over the next few decades and those with the wealth will play a big part in shaping it.

How then can the current and future generations set themselves up to succeed?

Here we explore four key steps to consider.

1. Discover your legacy

The first thing that you should contemplate is the legacy you want to leave behind. Get clear on what you want for your business, for your family and for yourself. How do you want to be remembered? What is important to you? Should your succession plan be implemented while you are still here? What do you want for your children? What do you want for your business and all of those that it supports? How will your estate be split?

These are all fundamental questions to ask yourself when trying to discover your legacy. Knowing the answers to these can often be difficult and can take time, but the sooner you start thinking about it the clearer it will become and the greater the likelihood that you will achieve it. If you want a good legacy, then don’t leave it to chance!

2. Set up a structure that can stand the test of time

It’s all well and good to know what you want your legacy to be, but how you structure your affairs can make or break it. If it is not structured correctly, it can lead to family conflict, result in excessive taxes being paid and could even threaten the long-term viability of your business and your family wealth.

All too often do we see families stop talking to each other as a result of a poorly structured succession plan. Therefore, get your structure right. Design it so that understand if this vision is shared with your successors and the family. relieve a lot of the pressure that family members may be feeling.

Often times conflict arises from a lack of communication and misunderstanding. Talk to your successors often and make a point of including them in the process. Does your family know what your wishes are? Does your family know what the plan is for your succession? Do you speak with your successors regularly about this these matters?

It is often helpful to get an adviser involved in with these discussions. We often find that while both generations are thinking about this issue, they are hesitant to discuss as they do not know how to bring it up in a constructive manner. (Possibly worried that it could cause conflict or that it is a taboo topic.)

4. Prepare the next generation to succeed it protects your family assets, is clear on how your estate will be managed and is efficient from a tax perspective.

Wealth can do strange things to people. It’s important that your successors are prepared to handle the responsibility that comes with significant wealth.

To assess this, you should conduct an inventory of your successors preparedness to handle the transition. Consider how money and responsibility may affect them and their lives. If there is a family business, consider if there are any knowledge gaps in respect to the business.

It may be necessary for your successors to undergo further training or study. They may need to work in another business for a while to bridge some of their knowledge gaps. It is also important to start to get them involved in the decision-making processes within your business so they can see how you make decisions and manage.

There are many moving parts here, some of which you will not know about or have the expertise in. That’s why it’s important to get advice along the way.

This is not a simple task, that’s why it’s important to have the right advisers and governance structure in place to support you. The governance structure may include an advisory board for your family business, maybe a family council or you may even need to set up a family office. The point is, every situation is unique, getting the right advisers and governance structure in place is vitally important in making sure you get it right.

3. Communicate and document everything

Communication should be at the heart of your planning process. Whatever the vision that you have for your business and your family, it’s important to know and

That is where an adviser can come in, they can guide you through the process and ensure that everything is put on the table and discussed. They will also help you to document your succession plan, including your Wills, shareholders agreements etc, and can become someone the next generation can turn to for guidance and support

Succession can be an emotionally charged topic that is difficult for families to discuss. While it can be an awkward topic to bring up, the reality is that succession is one of the biggest risks to the ongoing viability of a family business and your family wealth. By putting things on the table ahead of time and creating transparency amongst the family, you can minimise potential conflict down the track. Once the issues are all out in the open, it can also help

Every family is different, and every transition is unique. However, if you can go through the above steps then you can drastically increase the chance of a successful transition.

With that in mind, the best thing that can do right now is to actually get started. It takes time, and the more time you invest in it, the better the future they will be inheriting.

If you need a hand with your transition, then get in touch for a free consultation.

If you wish to take up this offer please contact Kim Kelloway, Head of Clients & Markets on the HRIA hotline 02 9020 4211 or email kkelloway@hlbnsw.com.au.

Blue Diamond Powers the Formula 1 using Hydrogen Fuelled Generators

A big step towards Net Zero future was the first fully sustainable activation at this year’s Australian Formula 1 Grand Prix. Working together with Australian Grand Prix Corporation iEDM, Blue Diamond & Net Zero Equipment, EODev, the organisers sampled a taste of the future by using Hydrogen Fuel Cells to sustainably power the Grand Prix Tech Hub. The EODev GEH2 Hydrogen fuelled generator is powered by Toyota Fuel Cells, which combine Hydrogen and Oxygen to produce usable electricity. With the only exhaust material being water. The fuel cells operated over the event, producing approximately 1.8MWh of green energy. With zero carbon emissions, and whisper quiet operation. It’s been great to see this technology in action and taking greater steps towards achieving Net Zero targets in Formula 1.

GAVIN STUART, PARTNER, ADAM CUTRI, PARTNER AND REBECCA HEGARTY, PARTNER AT BARTIER PERRY