Unplanned Succession: A case for early estate planning

In this life, death is inevitable and succession is certain. If the baton must pass, it might as well be passed on in an organised manner. An unplanned succession may lead to many issues. Without clarity on the intentions of the predecessor, there lies the room for ambiguities which may lead to conflict among family members and beneficiaries.

Why you need an estate plan 

Africa has historically been a patriarchal society, with the head of the family having the final say. In my experience of serving ultra-high net worth families, this has transformed significantly in recent times. The next generation has different thoughts that are more aligned to the fast-evolving business models. Usually a generation gap would mean a couple of decades but now, siblings with even 5 years difference think very differently. Differences of thoughts, ideologies and views of life spilling into business can have significant consequences.

Recent changes in policies especially as it relates to taxes emphasises the significance of paying attention to Succession Planning. While currently there is no concept of Inheritance Tax/Estate Duty in Nigeria, if such tax is introduced, it can potentially expose the entire estate to huge taxes and entail significant cash payouts.

Ralph Waldo Emerson famously said, “It requires a great deal of boldness and caution to make a great fortune; and when you have got it, it requires ten times as much will to keep it.”

What should you know about estate planning?

For any succession plan to achieve its intended objective, it must be well consulted between key family members (which is why I usually advocate for a strong family governance structure), thought through in detail, appropriately documented and effectively actioned. Typically, the key essentials of a good succession plan are honest and transparent communications, segregation of economic succession and management succession, a collaborative approach driven by a win-win objective, and robust documentation.

Over the years, families have typically adopted various practices for succession planning. In my experience, families have utilised either one, or a combination of wills, trusts and foundations to design their succession plans. Most families realised that while the process is not easy and can sometimes be emotionally draining, it is imperative. 

Initiating the conversation within the family is the first and the most arduous task, but once the ice is broken, with reasonable commitment from key family members and a well-established ecosystem of advisors or better still a family office that can coordinate properly, things start to fall in place. The key is to conceptualise the structure with all agreed family principles. Typically, most families opt for a Trust Structure as it facilitates family succession and potentially shields it from Estate Duty implications. A Trust Structure would also help ringfence family assets from possible claims arising in future in relation to business and events such as divorce.

Next Gen vs Gen X: A different approach to estate planning 

From experience, next gen family members are warming up and attuning to the idea of planning which often facilitates the Gen X transition into a planned and effective structure and then assists families to remain cordial, in harmony with clear "haves/have nots" and "dos/don'ts". Often the next gen's approach and mindset can be the "catalyst" to the success or otherwise of a Gen X's estate planning journey.

Succession planning is a personal and sensitive matter. While families have increasingly started seeking professional help to address legal or technical aspects of succession planning and be guided on sensitive matters based on best practices being followed by most family offices. Families have realised that it’s essential to have experienced personnel to handhold them to decipher critical aspects and assist them in navigating through this delicate process.

Much like a referee in a football match, the trusted advisors serve as neutral parties and are seen as unbiased, which only helps in the consensus on key differences in Succession Planning.

How does Genea Family Office approach estate planning?

Trusted advisors are instrumental in enabling the family to navigate through certain discords and plan for challenges to arrive at a common vision/family objective and build governance structures to preserve wealth across generations.

For example, one of our clients wanted to create a seamless ‘Structure for Succession’ covering management of the family’s business and global investments, identifying suitable new businesses for the next generation and management of the charities. We worked over a 12-month period with the Family Principal, his family members, and senior colleagues to ensure that a robust governance framework was put in place for all the above areas identified. 

Specifically, we addressed issues around the organisation structure and bench-strength, educating the next generation on their roles and responsibilities and providing best-practice guidance on specific policies/processes that could be adopted by the family to manage its objectives.

Starting estate planning early is one of the best investments a family can make for its future. If you need help in this regard, please get in touch with us @ info@geneafamilyoffice.com. As a go-to trusted partner to enterprising families, we will help you to create pathways and structures for continued growth and lasting success as you build your family legacy.

PS. I share thoughts on sustainability in family businesses and transgenerational wealth. Learn more about my work with enterprise families and ultrahigh net worth individuals here: www.geneafamilyoffice.com