By Marc Farror

Like all businesses, family businesses need to deal with a diverse range of challenges including reacting to market changes, cash flow pressures, retaining the best management talent and driving international growth. Without doubt though, the most critical challenge involves generational change.

Within the trust world there are countless stories of families who create wealth through an entrepreneurial individual and lose it again within three generations. Making a success of succession is not by any means impossible and there are large numbers of high profile families who not only protect their family wealth, but manage to actively grow it from one generation to the next. Often, a crucial element of this success lies in the use of appropriate Jersey structures to control key areas of decision making – governance, education and communication.

Governance helps determine how and when decisions are made and by whom. It helps to resolve disputes within the family and those between the family and a trustee, all of which can impact upon wealth preservation and growth. Good governance lies at the heart of effective succession planning and is an integral part of wealth structuring.

The education of family members is not limited to the process of formal education. Rather, business oriented families need to establish their own values if they are to be handed down. A trust structure can provide the perfect backdrop to achieve this, detailing any areas of education and experience that might be useful for family members to bring to bear upon the family business. Many families who run their own office prefer family members to have worked for a significant period in the investment industry for example, prior to entering the family business. In the more successful family dynasties there is a direct correlation between effort (in the family business) and reward.

Whilst establishing open channels of communication within the family can help eliminate divisive behaviour, the same can be said of communication between trustees and individual beneficiaries. One of the perennial problems that trustees face is how much information they should pass to beneficiaries. On a practical basis it makes sense for trustees to engage with beneficiaries as early as possible, thereby allowing younger beneficiaries to understand why and how decisions are made.

For the family seeking a successful succession strategy, a wide range of Jersey structures exist which can be adapted to suit the most complex family requirements, crossing continents, religious and cultural boundaries. Trusts, Foundations, Private Trust Companies and Sharia structures can all have a role to play.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.