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
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.
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