It is all but impossible to predict what will happen to our families into the future. In a family's lifetime, they are likely to experience at least one and more likely, four or five unexpected challenges. Bring money into this equation and it can complicate things considerably.

While it may be difficult to predict what might happen, putting the right asset protection provisions in place early may help families to avoid some of the potential pitfalls as these situations arise.

Family businesses, large or small, need to effectively deal with multiple family relationships and challenges. This, combined with business matters and increasing societal issues for the future generations, make it necessary to be well prepared in order to protect the family's assets.

Peter Pagonis, Deloitte's Family and Individual Wealth National leader works with family businesses and knows just how vital it is for them to have a plan.

"Asset protection for families, whether large or small, is an important aspect of preserving wealth and private businesses.

Families need to make sure they have the right structure in place to protect those assets in case they are attacked in some way in the future."


A session at Private Wealth Network's (PWN) recent Families' Masterclass presented five rules for the protection of family wealth:

  1. Plan early and plan often within your family. Late planning often backfires.
  2. Asset protection and tax and estate planning don't always mix.
  3. Communicate early and often about money, family, finance and succession between generations.
  4. For successful asset protection the emotion has to be removed.
  5. Use an expert and an independent advisor to assist implement rules 1-4.

Short term plans involve implementing some type of structure and legal documentation. With a range of structures available to family businesses depending on the circumstances, financial agreements are a secure option at an individual level.

Have the conversation

If time is on your side, then having conversations within the family are an important aspect of making long-term plans.

These conversations should revolve around a vision, plan, and agenda for the family, leading to making the best decision – and again implementing a structure and financial agreement according to the family discussions.

Actually starting the conversation with a family member and broaching difficult topics such as death, divorce, even an unplanned pregnancy, or organising a prenuptial agreement, can be the hardest part.

Peter explains how he often takes the role as an independent advisor, talking individually with the children (mind you these children could be grown adults) and parents to convey the importance of a financial agreement, without being hampered with the emotions associated with those relationships.

"The best way to protect and preserve wealth for the family, and plan for the next generation, is for family leaders to establish a structure and governance in their lifetime, and educate their children so they all understand and are comfortable with the approach. It is too easy to put these matters off and so push problems down the line – or even until it is too late," says Peter.

Financial agreements

According to Damien Greer of Damien Greer Lawyers, one of the panel members at the PWN's Family Office Congress VIII, many families have limited knowledge around financial agreements and how to protect their assets. This area calls for more education.

The lack of awareness could be attributed to Australia's slow progress in the area of financial agreements in particular. It was only in 2000 that changes were made to Australia's Family Law Act in order to enforce financial agreements in courts.

Since then, their reputation has improved significantly. These agreements are now regarded as reliable and legitimate documents when prepared by appropriately qualified and experienced family lawyers.

The legislative changes at that time were triggered by changing cultural and social attitudes toward marriage and divorce, and the need to enforce financial agreements for members of married, de facto or same sex relationships.

Changing of the guard and guardianship

"Relationship breakdowns in marriage are now more common in 'children' compared with their parents' generation. This has become one of the greatest threats to family asset protection, especially for future generations. Particularly today as people have children later in life," says Damien.

Damien says financial agreements are a realistic and necessary step to protect family assets from internal disputes involving new members to the family group. With younger generations in line to inherit the family business, they are dealing with standard family and business matters in the context of increasing social risks and trends.

This changing environment means that their responsibility to protect and preserve the assets of the family's future generations and business is more complex and multi-layered than it has ever been – needing the comfort of clear structure and governance.

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.