Are your kids entitled to your windfall? The EuroMillions family feud highlights some caveats of passing down wealth to the next generation, writes Sophie Wettern
You may have seen the news articles last week concerning a EuroMillions winner’s son, who has lost a court battle for ‘money for life’. A former factory worker from Cambridgeshire won a £101 million EuroMillions jackpot in 2011, together with his wife. He gave his son £1.6 million, which the son spent over two years, with his father regularly topping up the funds. Once the funds dried up following an argument, the son sought a ruling that his father and stepmother must financially support him for the rest of their lives, as his father had promised he would never have to worry about money again. The judge ruled last week that previous largesse did not give rise to expectation of further bail-outs.
However, issues regarding the management and passing on of family wealth do not occur only when the money is first generation, or received via an unexpected windfall. In many countries, family businesses represent more than 70 per cent of businesses overall. Examples include Fiat Group in Italy, L’Oréal in France, LG Group in South Korea, and Siemens in Germany.
It is a fact of life that each family will contain different personalities. Particularly where the wealth has accumulated primarily through the actions of one key individual, there can be a tendency for the family to be guided by that person and for their voice to dominate discussions. However, nobody lives forever, and it is important to be prepared for the time when the wealth passes on to the next generation. With studies showing that 95 per cent of family businesses do not survive the third generation of ownership, many families are increasingly trying to take action to ensure a lasting legacy for future generations.
Once you have taken the obvious steps (making a will, choosing an attorney to handle your affairs if you should lose mental capacity, and considering trusts for your children and grandchildren), how else can you prepare for moments of transition, and ensure a lasting heritage?
In such matters, psychological factors can be just as important as succession planning. One recommendation could be to hold periodic family assemblies, to ensure that all members are involved and fully invested in the family’s wealth and decisions surrounding it.
From a practical perspective, consider identifying the key risks and how the family will cope with them. Consider making contingency plans, for example, a checklist of key points in case of unexpected death or incapacity.
You should engage regularly with trusted advisers to ensure they (and you) are aware of all facets of the situation and keep them up-dated, especially at key points in the family’s life, such as marriage or children.
In terms of longer term planning, it is vital that all members of the family are on the same page as to how the family fortune should be managed, and the priorities of the family. Various types of structure can facilitate this ranging from a family ‘road map’ to specific partnership or corporate structures. The choice will very much depend on the family dynamics and circumstances.
Sophie Wettern works at boutique private wealth law firm Maurice Turnor Gardner LLP