As the head of your family and business venture, you are being looked up to as the leader of your family and also the companies you are managing. As a business leader, planning well for the future is something that is expected of you and your management team. As the head of your family, you are expected to exercise the same standard when you plan for your personal wealth transfer as well as your business succession.
When we talk about business estate planning, there is a popular Chinese saying that you may have heard before. It says that a family’s wealth will not last beyond three generations!
Interestingly, the Americans also have a similar expression, “Shirtsleeves to shirtsleeves in three generations”.
Backed By Research
A ground-breaking study conducted by a wealth consultancy firm The Williams Group which involves 3,200 families over a 20-year period, found that 70% of the families tend to lose their fortune by the second generation, while nine in ten families lose it by the third generation!
The popular explanation behind this phenomenon is that, the first generation works hard to accumulate the wealth. The second generation while growing up, sees their parents’ struggles and have a good understanding of the value of sacrifice and hard work. They appreciate the frugal aspects of their lives growing up and will more likely hold on to their parents’ wealth.
However, the third generation do not appreciate the struggles and sacrifices of the previous generations. Therefore, they are more carefree and more likely to spend the wealth easily and may end up squandering the inherited wealth.
Learn From Example
There is a shining example that comes to mind when we talk about planning for your business succession and holding on to your accumulated wealth to benefit the future generations. He is IKEA’s founder, Ingvar Kamprad. When this highly respected business leader died in 2018 at the age of 91, he was ranked No. 8 on the Bloomberg Billionaires Index.
This is thanks to his control of IKEA’s global retail empire that was valued at US$58.7 billion. Interestingly, his wealth will not be dissipated because of a carefully designed and well-thought through wealth preservation strategy that he had put in place to secure the longterm survival of the IKEA business empire.
According to a media report, most IKEA stores are owned by the Stichting Ingka Foundation, a Dutch entity with the purpose of
donating to charity and supporting innovation in design, according to its founding statute. Meanwhile IKEA’s trademarks, brand and concept were placed under the ultimate control of Vaduz, a Liechtenstein-based Interogo Foundation whose subsidiary, Inter
Ikea, is the global IKEA franchisor. “Interogo Foundation is managed by a Foundation Council, consisting of at least two members and a Supervisory Council, as a principle consisting of seven members.”
This was disclosed by Anders Bylund, Interogo’s head of communications. He was also quoted as saying, “The Kamprad family members in the supervisory councils have been and shall always be in minority.”
Meanwhile, Stichting Ingka Foundation, is only partly philanthropic. Its statutes allow for profits to be reinvested in the company, according to Per Heggenes, the chief executive of the IKEA Foundation.
This smartly designed strategy put in place by Kamprad was designed to ensure that IKEA, is not in the hands of his family members, and thus would long outlive its founder. Trust experts say that the set-up ensures IKEA’s business continuity by making it impossible for any individual, whether a manager or heir, to assume control after Kamprad’s death.
It Can Be Done
You can also be the real king or queen of your family’s wealth kingdom just like Ingvar Kamprad, once you have come up with your very own comprehensive personal and business estate planning.
With an intelligently designed estate plan, your wealth can be fortified with a “legal castle” to shield your wealth from all creditors and vultures, as well as to avoid the probable ugly family feuds and disputes, which will tear up and destroy your family’s wealth kingdom. Your legal fort can be watertight against all types of claims and risks, including director’s or professional liabilities.
By utilising well established and advanced legal means and structures to hold the ownership of the bulk of your wealth, you will be able to perpetuate your family’s wealth kingdom, and escape the curse of family wealth being dissipated by the third generation!
You will also be able to protect the interest and well-beings of your beneficiaries and descendants. You get to enjoy serenity and inner peace knowing that when the time comes, your family’s wealth kingdom is intact and it serves the needs of your loved ones.
Let them thrive from the blessings of your wealth kingdom, rather than suffer from the curse of inadequate planning. Your descendants will come to admire and respect your vision and the decisiveness in getting a comprehensive family’s wealth
succession plan, just like the late Mr Ingvar Kamprad.
About the Author
Lee Khee Chuan holds a B.A. from National University of Singapore and a chartered financial consultant (ChFC), chartered life underwriter (CLU), CFP professional, and Fellow, Life Management Institute (FLMI) USA. He is also a licensed financial adviser representative with more than 25 years’ experience in estate planning. He shares a lot more valuable insights at www.estateplanningmalaysia.com