I read recently that Paul Shervish of Boston College estimated between 1998 & 2052, $28-$118 trillion in wealth will be transferred to the next generation in the US.
One could conceivably estimate that as Australia’s population is around 7% of the US, somewhere between $1.75 & $7.8 trillion might transfer inter-generationally over that same time.
It doesn’t end there, The Economist cited in 2001 that this will result in a failure rate of 70%. Yes 70%!
Now, a failure is described as when “wealth is removed from the heirs control via any combination of taxes, losses, economic downturns, missed market opportunities, litigation, divorce or any other conceivable events”. On the other hand a successful transfer is defined as “wealth remaining in the control of the beneficiaries”.
It gets better, only 15% of causes are attributed to poor legal or tax advice from professionals but a staggering 85% is directly attributed to a breakdown in trust, communication and therefore preparing the successor for the family business, farm or inheritance.
So what does this really mean?
If you wish to successfully hand on your farming business to the next generation, preparing your family for receiving your farm is the most important factor in whether you will be successful or unsuccessful.
But remember, when it comes to transferring farms you don’t want to wait until you die. In my experience doing this almost always end in a disaster and the loss of a significant portion or all or what you have worked to build.
Remember the old quote from Benjamin Franklin, ‘if you fail to plan, then plan to fail’.
Cheers
Ref: “Preparing Heirs – Five Steps to a Successful Transition of Family Wealth and Values” – Roy Williams and Vic Preisser