Omnia in Campden FB: Sibling Rivalries and Family Dynamics When Planning Succession
Most family business owners know that having a succession plan in place is a critical part of estate planning. But what happens when the heirs of the business have different needs, talents, goals and involvement in the family’s business?
Sibling differences and communication barriers can create major obstacles to a smooth transition in leadership that can lead to the ultimate destruction of the company. This is a situation that Omnia Family Wealth has a great deal of experience navigating, and they recently discussed this in Campden FB. A portion of the article is below.
A total of 70% of family business owners would like to pass their business on to the next generation, but the reality is that only 30% will be successful in that transition. Why are we facing such daunting statistics? Every family wants to create a legacy for their children, but often are not doing the hard work of addressing it today. It is much easier to put it off for another day. However, that day may not come.
Three scenarios often face a family business once the founders give up control: It will continue to generate healthy profits; your heirs could take over, leading the business to a whole new level of profitability; or the family business will ultimately succumb to the many challenges facing families during a leadership transition.
If some of your children are involved in the business, and others are not, they will view the business very differently. This can range from a self-worth to a cash flow perspective. If you have a non-involved owner, the conversation around what to do with excess cash flow can become divisive. If one child wants to reinvest in the business, and the other wants to take distributions to fund their lifestyle, you could be introducing an avoidable conflict between the two siblings. The complications grow exponentially if you have even more children in the business, or children from multiple marriages involved, in-laws, etc. The goals are protecting what you have built up to this point and being fair to all heirs… As owners of the business and wealth creators, one has the absolute right to determine how they want assets to be distributed and what future leadership of the business will look like. The problems arise when this is not clearly communicated
To see additional recommendations of actions business owners can take, read the full Campden FB article here. To learn more about navigating sibling differences when it comes to succession planning, see our recent commentary or listen to a replay of our interactive webinar conversation on this topic.
Important Disclosures: Omnia Family Wealth, LLC (“Omnia”), a multi-family office, is a registered investment advisor with the SEC. This commentary is provided for informational purposes only. No portion of any statement included herein is to be construed as a solicitation to the rendering of personalized investment advice through this communication. Consult with an accountant or attorney regarding individual tax or legal advice.