Recent upheavals sweeping the globe, including significant changes in social and familial structures and technological, political and economic shifts, have quite obviously also stoked the fire of underlying family tensions with incendiary results. Often the next generation fails to conform to the expectations of the wealth-originating generation and their goals and ambitions can diverge quite significantly. Even the basic evolution of cultures and beliefs, and a new generation's exposure to different worlds and thought processes (not to mention changing risk appetites), can cause ruptures. Sometimes these can be healed, occasionally they are incurable.

Sources of pain: generational gaps and sibling rivalries

A significant threat to unity amongst wealthy families is the absence of - or a dysfunctional approach to - succession planning. There can sometimes be a, perhaps understandable, tendency for individuals to shy away from contemplating their deaths and entering into meaningful discussions with their family about the future. In some cases, there may be a temptation for the family matriarch or patriarch to use their wealth as a mechanism for enforcing their wishes on their children and grandchildren – even from beyond the grave. This can be harmful both at an intergenerational and intragenerational level, opening up the field to sibling rivalries and disputes.

The assimilation of the next generation into the family business can also pose substantial challenges if it is not carefully managed with a guiding hand. Rifts frequently arise as new generations seek to carve out their own niche and take the business in a new direction by revamping long-standing policies, procedures and processes. This can be an emotive issue for many members of the originating generation whose sense of self identity is tied up with the business and who have devoted their life to its success. Conversely, the source of strife may be an individual’s decision to “go their own way” rather than entering the fold of the family enterprise. A reluctance by heirs to follow the same path as their parents can breed hostility as such decisions can often be viewed as shirking responsibility and prioritising the individual’s wishes over the interests of the family as a whole.

Another cause of family contention is the rise of new ideologies amongst forthcoming generations which conflict, sometimes violently, with the values of their forebears. There has been a trend amongst the next generation of wealthy individuals to show disinterest (and in some cases active distaste for) the family wealth and there is now a movement amongst some to disavow their inherited wealth. This may particularly be the case where there is a perception that family wealth promotes social injustice or has historically been connected to or generated from activities which offend against modern ethical codes (some examples could include investments in fossil fuels, tobacco and activities which exploit vulnerable or indigenous groups). Such views may be an anathema to other family members, who may consider such ideas to be self-entitled and naive.

Antagonisms may also arise where there are differences in opinion regarding the investment of the family wealth. Some members of the family may be keen to cash in on high-yield, and what might still be considered as higher-risk investments (i.e. psychedelics, cryptocurrencies, NFTs, apps and video games). This can be alarming for earlier generations, where the family wealth originally derives from a conservative strategy built on traditional sectors such as retail, property and manufacturing.

Solutions and strategies

The old adage is correct: prevention is always the best form of cure. Early engagement with the next generation and offering up an effective succession planning strategy is an important tool for promoting family harmony. This should entail a consultative approach, steered by professional advisers. It is important that any agreed strategy is consistently aligned across the family’s private and business interests. Thoughtfully drafted wills, trusts, family charters and shareholder agreements are some of the essential tools for achieving these ends. Inbuilt flexibility is essential to ensure that any planning can cater for a family’s current and future needs.

Where the malady of family discord already exists, more drastic intervention may be required. In some cases, for instance where existing wealth holding structures are no longer fit for purpose, the only option may be to operate and separate. It is usually possible to restructure old trusts and companies which no longer fulfil the family's requirements. For instance, it may be possible to vary existing trusts or create separate sub-funds within a trust to better serve the family’s needs. In some cases, administrative applications to court will be required to aid this process. Such applications can also assist with the development of new investment mandates. An even handed and neutral approach from the family's trustees can aid the healing process: sometimes it can be effective for the beneficiaries to have different points of contact at the trustee company. Other external avenues of guidance should not be disregarded: family counselling and mediation can be a more constructive, cost-effective and private alternative to airing grievances in contentious court proceedings.  

Of course, sometimes there are wounds which are too deep to heal and it may be cleaner to amputate and cauterise than to limp on. For instance, where it is not possible to resolve animosity between different branches of the family it may be possible to create separate trusts from an existing trust, possibly with different trustees, to hold each branch’s share of the wealth. Where there is a family business involved, the option of a buyout may be the best solution for moving forwards.

Family disputes are not always fatal and, if carefully advised, families can regroup and restructure. Often this can result in a healthier family with a revitalised wealth generation plan.

An original version of this article was first published by ThoughtLeaders4 Private Client Magazine, Issue 8, August 2022.