Being a business owner is considered an “American Dream” by many, yet when it comes to succession planning, a recent survey reveals that not everyone feels the same way about passing the torch onto their children. Many owners don’t want their kids to inherit the family business.
The survey was conducted by Versta Research on behalf of Wells Fargo in January and February 2023, and studied the attitudes of 1,008 “wealth creators,” which were defined as U.S. adults aged 50 or over who have at least $1 million in investable assets and earned (not inherited) most of those assets. Thirty-nine percent of business owners say their business has been an important source of meaning and purpose in their lives, yet half (52%) don’t want their children to inherit and succeed them in running the company. And among parents, nearly all (93%) want their children to forge their own path, rather than follow in their footsteps.
“It may sound very much like the plot of a television drama, but many investors lack confidence in their children’s ability to step into their shoes. Others believe handing over the keys to the castle will be a disincentive to earning their own financial success,” says Michael Liersch, head of Advice & Planning for Wells Fargo.
But as Liersch points out, some wealth creators feel they are doing their child a favor. “Many parents are simply recognizing that their children’s strengths and interests are not aligned with the family business. Having those insights can be key to effective succession planning.”
All this is not to say that parents don’t want their children to succeed. The large majority (67%) want their children to live up to their family’s standards of wealth and success, and many go so far as to assist them financially with education, car purchases, healthcare expenses and even travel and vacations.
Nine out of 10 business owners attribute their own financial success specifically to hard work and determination. Two-thirds (67%) cite the advantages of a good education, and over one-third (37%) acknowledge the importance of living in the land of opportunity, while a quarter (23%) acknowledge the role of luck.
Helping to move this success down through family lines tends to get trickier for some, though. While 73% believe they have succeeded in passing down their financial values, 45% worry about their children not knowing how to build wealth of their own, and a third (35%) report it has been hard to transmit their work ethic to their children.
So how can one plan for the future in a way that may help protect the business while promoting family harmony? Leaning on a wealth and investment management firm that has expertise in succession planning, estate planning strategies and family dynamics can help families forge a clear path ahead.
“What’s most important is that everyone is aligned and there are no surprises,” added Liersch. “Without a thoughtful conversation and formal plan, assumptions can be made and disruption to family dynamics are highly likely.”
Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.