When an estate lawyer, a tax accountant, and a financial advisor sit on a panel together, one thing becomes crystal clear: legacy planning is a team sport. I recently had the privilege of speaking as a panellist at a meeting of the Society of Trust and Estate Practitioners (STEP) NSW alongside these other professionals.
Family-owned businesses are the backbone of the Australian economy, representing roughly 70% of all businesses and employing about half of our workforce. Right now, we are in the midst of a historic intergenerational wealth transfer as the Baby Boomer generation begins passing down wealth heavily concentrated in property, superannuation, and privately held enterprises.
However, I often remind my clients of a crucial distinction: while traditional estate planning prepares your assets for your family, genuine succession planning prepares your family for the assets. Ultimately, the greatest risk to your family's long-term wealth is relational, not structural.
Redefining True Family Wealth
To successfully transition wealth across generations, I believe we must look beyond purely financial assets. Using the well-regarded framework developed by adviser James E. Hughes, holistic "family capital" is divided into five vital components:
Human: The physical and emotional well-being of each family member.
Intellectual: The unique knowledge, skills, and experiences your family holds.
Social: Your family's relationships and connections within the wider community.
Spiritual: The shared values, purpose, and vision that unite you.
Financial: The economic assets that act merely as the engine to support and grow the other four qualitative forms of capital.
Practical Steps for a Smooth Transition
Succession planning should start early and never wait for a crisis. A fellow STEP member, Henry Brandts-Giesen, recently reminded me that proactive families must communicate transparently and plan for what he calls the "five Ds": death, disability, divorce, distress, and disagreement. I tend to agree.
Each of these areas has its own intricacies and unique complexities that no single professional is fully qualified to navigate alone. No one person or adviser will have all the necessary information to advise effectively when there is any level of complexity.
At the STEP panel discussion, a number of less-than-ideal scenarios were discussed that were the result of poor planning.
To navigate these risks effectively, families should build an integrated team of advisers—including financial planners, accountants, and lawyers—who work collaboratively rather than in isolation.
The question is: is your legacy plan up to date, and are your current advisory professionals working together as a united team to protect both your financial and relational capital for the future?
Written by Gary Spencer
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.