Since the end of the Second World War, there has been a huge increase in life expectancy across the world, notwithstanding a slight Covid-induced reduction in the last few years. The World Health Organisation reported that globally life expectancy has increased by more than 6 years between 2000 and 2019 (from 66.8 years to 73.4 years)1. Even allowing for Covid, there is no doubt that such increasing lifespans are having a major impact on the make-up of evolving families and how they approach succession, both within the family and in respect of any family business.
It is now not uncommon for a family to have at least four living generations, with members of different ages and different outlooks, all of which have to be taken into account when considering the best way forward for the family and any family business. Whilst there are clearly a lot of benefits for this increasing longevity, it also comes with a number of pitfalls that the well-advised evolving family will look to address in advance of any such issues arising.
Many entrepreneurs/wealth creators have traditionally had a complicated relationship with succession and passing assets and control on to the next generation, often looking to hang on to both assets and a degree (or more) of control as long as possible. This often led to difficulties, even when lifespans were shorter than today, as individuals could look to keep control much longer than may be good for either the family or the business, and also could lead to troubled successions when it eventually happened, with the next generation not necessarily being ready to pick up the reins, having been kept at arm's length. Increasing life expectancy may well only make such issues worse, especially if such individuals look to stay involved for longer, making the necessity of having an orderly succession plan agreed with all stakeholders well in advance.
With longevity can come a whole host of other issues, foremost of which is capacity. In the UK, for example, 1 in 11 people over the age of 65 have dementia2 and as the number of elderly people increase and as people live longer, this proportion will only increase (the same is true for all countries in the developed world). The loss of capacity in a head of a family or family business can have grave consequences, particularly as, unlike with death which is by its very nature a very final act, capacity is usually lost only gradually and not on a straight-line basis, making it very difficult to judge and a real grey area to grapple with. This can lead to uncertainty in decision making and, at its worst, a vacuum as the centre of a business or a family which can be very destructive as hitherto clear and well-defined chains of command and decision making are upended.
Typically families are much better at planning for death rather than for loss of capacity, but increasingly it becomes important to look at both at once. The use of Lasting Powers of Attorney (or local equivalent) is becoming more widespread, as is the idea of putting business succession plans into place on both death and loss of capacity (though clearly the definition of loss of capacity and how it is to be judged requires a lot of thought and input from a family). Taking the right advice is crucial and a structure can be arrived at that is tailored for your family, whilst ensuring that best practice is followed as much as possible.
Great opportunities and benefits can also come with increasing longevity. Many individuals are starting to treat retirement like a new stage of life rather than a more traditional retirement model and as a result are looking to be more active with their time, money and life, not necessarily having to spend all their good years on just one aspect of their life or business. For those evolving families with well thought out and implemented succession plans, retirement can be a new lease of life as the individuals look to other activities, safe in the knowledge that there has (hopefully) been a successful transition to the next generation. Such older members of the family can use their knowledge and experience in other ways for both their own benefit and the benefit of the wider family, whilst perhaps moving away from a more operational role within the family.
The increased longevity for many in evolving families is certainly a blessing for most, if not all, but does require some careful thought, in conjunction with the family's advisers, to ensure it never becomes a curse.
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.