OPINION: Handing over the family business is not an event, it’s a process. Getting the right advice is essential.
The battle over a family trust saga that played out as a blockbuster in a United States courtroom has offered more than merely a Succession-style glimpse into the Murdoch dynasty.
Nonagenarian Rupert Murdoch attempted to change the 1999 trust that granted four of his offspring equal voting power over the family businesses following his death, despite three of the four children being unhappy with this proposal.
This prompted a legal tussle in a Nevada probate court, which rejected his proposal. Such family disagreements are not uncommon among less prominent families, and altering trusts can be fraught with pitfalls.
The Australian Taxation Office estimates there are more than a million family trusts in the country, and it’s well established that family members do not always see eye to eye.
Getting your house in order does not require public scrutiny or an HBO TV series about your family – yet sound advice and early planning are crucial.
As a specialist in business advisory, I work closely with companies, business owners and their families to navigate and resolve family related issues as they arise and evolve over time.
Family business succession is not an event, it’s a process.
Getting the right advice upfront is essential.
Like Succession’s dynastic scion, Logan Roy, some family businesses suffer from “founder syndrome”, where a company leader struggles to relinquish control to the next generation.
But like Logan Roy, founders cannot live forever, and either a handover to the next generation or a company sale is inevitable.
Trust between the generations is key. Generational planning and collaboration are vital to ensure a successful transition.
A crucial part of this process is documenting intentions to ensure the business history, purpose, culture and values are passed down.
Integrating the next generation into company roles is a common move that presents pathways to develop skills to take the business forward, as well as reinforcing the group’s legacy and values.
Finding common ground between generations can diversify power away from founders and create opportunities to share control.
If a founder trusts the next generation with responsibilities, they will feel empowered and engaged, reducing the possibility of disharmony.
However, just because one child has worked in the family business and another has not, it does not mean they both cannot contribute to future success.
Not everyone can play a part on filling a founder’s big shoes, yet there are other ways they can become involved.
When considering a family charter or shareholders agreement, both written values and aligning understanding builds trust with family members and assists advisers in facilitating the process.
Family trusts can be a fluid option – children at 18 are different people to when they reach 25, or even 35.
The needs of the business and the needs of the next generation will evolve. Getting started early is crucial.
As with Logan Roy’s exit, the sudden death of a founder can leave the next generation jockeying for position amid the chaos.
An example of well-timed and sensible succession planning can be seen in the estate of Western Australian property, mining and retail magnate Stan Perron, who established provisions to cement his charitable legacy.
Four decades before his death in 2018, the 96-year-old established the Stan Perron Charitable Trust that donates millions of dollars annually to dozens of charities.
As well as making provisions for his family, the Stan Perron Charitable Trust allocated funds for WA child health and medical charities, reinforcing the self-made billionaire’s legacy as one of WA’s greatest philanthropists.
Mr Perron’s decision to act early, to outline his wishes, align aspirations with his daughter and broader family, and to seek good advice were all crucial factors in the success of the trust.
Families can get emotional and irrational when grief and money come together.
Sound professional advice is vital to provide counsel, facilitate mediation and foster a culture of trust and collaboration.
Not every family succession needs to become a courtroom scene.
Every family is different, which is why early planning remains key in ensuring specialist advice can be accessed and carefully considered as part of the family succession decision-making process.
• Peter Sarandopoulos is a Business Advisory Partner at RSM Australia
