What are the core issues when it comes to succession planning?

Category: Australia & News

Succession planning should be about more than the transfer of your wealth to your intended beneficiaries.

There are other issues you need to address when you’re putting your plans together and it’s important to look ahead and have an outline vision of your objectives.

Read about five of the core issues you need to be aware of, and plan for, when succession planning.

1. Understand and share your succession planning priorities

Assessing what your succession priorities are at outset is a key step to ensuring you end up with a robust plan in place that is designed to meet the needs of both you and your family.

It can help to talk with your loved ones, so you all have a clear idea of what the overriding priorities are. These may include:

  • Preserving your family wealth 
  • Maintaining a certain standard of living
  • How you see your family legacy once you’re no longer at the helm.

It could easily be a blend of all three. The key point is that making plans will be easier if all your family have a common understanding of your intentions. 

By confirming that, you will be in a far better position to move forward with a shared purpose rather than potentially facing issues of distrust and dissent. 

2. Think about the structure of your family

It’s worth taking time to consider the structure of your family, and how that might affect your succession planning. 

In many cases, your wealth can pass seamlessly on to the next generations of children and grandchildren. 

However, what happens if your circumstances aren’t that clear cut? For example, you may face issues with your extended family, who might live in a different country or who you haven’t communicated with for some time.

Furthermore, if you or your spouse or partner has previously been divorced, you may have to consider more than one family in your plan. 

You may also have non-family members such as lifelong friends and business partners whose views and feelings may need to be considered.

You should be able to address many potential issues in your will, but there may be some work to do beforehand to ensure things can run as smoothly as possible.

We would stress the importance of getting expert legal advice in this regard to reduce the risk of future challenges and the possibility of your family being tied up with legal wrangling after your death.

3. Know who will be in control

Another important part of your succession planning process will be understanding who will be in control of your wealth after you pass away. 

You’ll know your family better than anyone, and you need to be comfortable that the new perceived “head of the family” has a clear understanding of your wishes and intentions. 

You may also want to ensure that they will be willing to engage with the rest of your family, and other beneficiaries. There will be different personalities to consider, as well as the fact that some may have different priorities in terms of how your legacy should be managed.

4. Deal with the future of any family business

If a big part of your legacy is a business you own, either outright or in part, this can add a further layer of complexity to your succession plan. 

You will want to consider how the business is perceived by other members of your family, in terms of whether it is seen as an integral part of your family identity, or simply as an income generator.

Some issues that will influence this could be:

  • The length of time the business has been in the family
  • The type of business it is 
  • Whether you feel other family members can run the business in your absence.

You should have a clear idea in your own mind as to what you want to happen to the business after you pass away. It’s likely you’ll already know this, but it’s important to ensure that your wishes are communicated to all concerned.

If your business is effectively a one-man band, then the process could be relatively straightforward. But if you own a bigger company there will no doubt be many people whose feelings and personal aspirations you’ll need to take into account.

5. Write your intentions in a will

Based on the issues you’ve read about here, it’s no doubt become clear how important your will is in terms of addressing potential conflict, and ensuring your wealth passes to the people you want it to.

As a result, it’s advisable for you to prioritise drawing it up, and to ensure you have expert legal guidance to support you in this. You should also ensure that your spouse or partner does the same.

Once you have a will in place, make sure you check it regularly to confirm that it is still fit for purpose, especially if there are major changes in your family circumstances that will need to be considered. 

You should also use your will to address other issues such as your philanthropic intentions and any gifts you want to make to non-family members.

It’s worth remembering that you can also attach other documents to your will. For example, you may want to include a simple statement that outlines your hopes for how your legacy is dealt with. Although this won’t form part of the legal document itself, it will be communicated at the same time as the terms of your will are formally disclosed. 

Get in touch

If you have any queries regarding the financial aspects of your succession planning, please get in touch with us. 

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of ATO legislation, which is subject to change.