As a family business owner, you’ve worked hard to build something of real value, something you hope will support not only your lifestyle but that of future generations.
The weight of the proverb "shirtsleeves to shirtsleeves in three generations" might weigh heavily on your mind. This proverb describes the ‘third-generation curse’ - how the hard-earned wealth of a first generation is often lost by the third generation, leading the family back to its original modest circumstances. Unfortunately, statistics derived from family business research back up this sentiment.
But when it comes time to pass that wealth on, things can get complicated. Family dynamics, unclear expectations, and poor planning often turn a legacy into a legal and emotional battleground.
Here’s what you need to know, and how to protect both your business and your family’s future.
The hidden challenge: more than just dollars and shares
Many family business owners want to ‘keep it in the family’, passing their business and assets to their children or other family members. But wealth, especially when wrapped in business assets, often carries emotional weight, assumptions, and competing interests.
The complexity isn’t just legal; it’s personal.
Your children might have very different ideas about the future of the business. Some may want to continue in the business, while others have no interest. Add in spouses, grandchildren, and divergent financial expectations, and things can quickly become fraught.
Fair ≠ equal: a common succession trap
One of the biggest succession planning mistakes we see is the assumption that fair means equal. That might work when you’re dividing a cash inheritance, but it can fall apart when you’re dividing a business.
For example, say you have two children, one who has worked in the business for 15 years, and one who lives interstate and has no involvement. An even 50/50 split might seem fair, but in practice, it can lead to tension, deadlocks, and resentment.
This is why tailored advice is so important. What looks fair on paper may undermine years of hard work and damage family relationships.
The business owner’s dilemma: control vs. legacy
Family business owners often face a deep internal conflict:
Do I give up control now to ensure a smooth transition?
Or do I hold on until I’m ‘ready’, risking confusion or disputes later?
Delaying succession planning is common, but risky. Without a clear plan, your family business may fall into limbo if you become incapacitated or pass away unexpectedly. Worse still, legal battles among heirs can tear apart both the family business and the family itself.
The legal tools to help you get it right
There’s no one-size-fits-all solution, but effective tools include:
· Wills and testamentary trusts that protect assets and control distribution.
· Shareholders or owners’ agreements that clarify ownership and decision-making rights.
· Family constitutions that outline values, governance, and future leadership pathways.
· Buy-sell agreements and business succession plans that allow for smooth transitions.
Importantly, these tools must be tailored to your family’s specific circumstances and reviewed regularly.
Conversations are crucial, but often avoided
Too many families put off succession conversations because they fear conflict. But silence doesn’t create harmony, it creates uncertainty.
Open communication, guided by advisors who understand both the legal and emotional complexities, is the key to a successful transition.
What success looks like for your family business
A well-planned succession strategy can:
· Preserve your family business across generations.
· Minimise tax and legal disputes.
· Maintain family harmony and clarity of roles.
· Ensure that the right people are in the right positions.
· Protect the value you’ve worked so hard to build.
Life happens quickly and years of hard work can go by in the blink of an eye. In our view, it is never too late to put in place a comprehensive strategy to ensure your family wealth passes to the next generation in the way you intend, and there is no time like the present. If these issues resonate with you, we encourage you to start formulating a plan
as soon as possible and set up your successors (and your family business) for generational success.
About the author
ADLV Law work with business-owning families to safeguard their enterprises, clarify ownership structures, and ensure long-term continuity, even during personal change. They are a family-owned law firm specialising in Wills, Estates, Succession Planning, and Business Law for over 20 years. They work closely with families and business owners to provide practical, tailored legal solutions that protect their interests and secure their future.
Phone: 1300 654 590
Email: wehelp@adlvlaw.com.au
Website: adlvlaw.com.au
ADLV Law offers a full commercial law service to independently minded entrepreneurs, investors and their families. We are ready to guide you to the right solution for your legal issue and have demonstrated expertise in advising on all aspects of commercial and business law, taxation, estate planning and succession, philanthropy, family law, property matters and commercial disputes.
