In most family business succession processes, the in-laws are excluded as beneficiaries and often from the entire discussion. This is not necessarily the most fruitful approach.
Wealth normally passes along family or bloodlines. The common occurrence of divorce has led many families to specifically exclude spouses and partners from being beneficiaries to protect the family wealth. The commonly cited example is the child who marries and then passes away unexpectedly leaving their spouse as their sole beneficiary. The spouse likely remarries and has further children and that share of the family wealth built up over several generations has effectively been lost. Of course, it doesn’t have to be viewed in this manner, but this is a common view and fear.
I have also seen other variations to the family/blood lines theme, two examples are:
- Families that only have daughters and, therefore, adopt the soon to be son-in-law so that when they are married he is also a son and can inherit the family wealth and still maintain family lines. This is common in traditional Japanese families, for example.
- A child born outside of wedlock is excluded as a beneficiary. This is sometimes on a religious basis and, in others, cultural to deter extra-marital relationships.
Whatever boundaries are placed around the context of ‘family member’ in a succession process, consideration must still be given to those who may fall outside these boundaries. To do otherwise is to jeopardise the succession process by either not making adequate provision for them and/or ignoring potential claims they may have.
There are two considerations that must be addressed in the succession process:
- Financial provision must be made for the spouse/partner/child of any family member who is a beneficiary under your succession process. This provision must either be made directly by that family member or through the wider family structures that have been created. And better to make a generous provision to ensure they are well provided for than to seed a potential claim for support.
- I would also recommend that the option/flexibility exist to include someone who is not currently defined as a family member as a beneficial family member. This flexibility can often be welcomed by future generations in maintaining family unity.
- The second consideration is communication. Family members will go home and talk to their spouse/partners about what is happening within the family business succession process. I would, therefore, recommend that any succession process provide Q&A sessions for spouses/partners to inform them about what is occurring and what their ‘rights’ will be under the process. This removes the burden from family members of having potentially difficult conversations alongside the risk of miscommunication. It also goes a long way to building trust, support and unity around the succession process.
Spouses/partners will have an influence on their respective family members and, therefore, your succession process should actively engage and include them in appropriate ways.
Active Knowledge Question:
- In what ways are you engaging and providing for the existing and future spouses/partners of family members?
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All the best in the success of your business,
Richard Shrapnel
