How to divide assets without breaking up the family? 4 styles, 5 steps to dividing inheritance & family business without drama.

If you're reading this, you've probably earned enough wealth to cause your children to fight each other. Congratulations! (Or should I be upset?) As a family business consultant, I can tell you that inheritance isn't just signing checks, transferring land, shares to your children, or writing a will and then holding your breath. It's a finer art than walking a tightrope across a deep valley with your children shaking the rope on both sides!

Today, we'll discuss four key concepts in inheritance management and five steps to passing on inheritance that might give parents a second thought and prompt them to take action today, so they don't have to keep dreaming of their children and grandchildren killing each other over inheritance!

Step 1: Choose the “Style” of inheritance that is right for your family.

It's like choosing an outfit for a wedding. If you choose the wrong style, not only will it not fit the atmosphere, it may also make others look at you strangely. Choosing how to manage your inheritance is similar. You have to consider your family's characteristics, your children's personalities, and what kind of impact you want your assets to have in the future. Let's see which styles the world's richest people choose, so we can choose the one that's most suitable for our family.

Style that 1 : “Giving Back”

This is the way of the billionaire who holds the philosophy “I love my children…but I also love society!” This approach reflects the belief that great wealth is not the result of individual talent alone, but is a product of society, and therefore an obligation to return surplus wealth to society. This approach often involves donating personal wealth to charity.

Warren Buffett's quote, "I'm going to leave my children enough money to do whatever they want, but not enough to do nothing," reflects this idea of ​​how to distribute wealth to children and society. The philanthropist grandfather gave away 99% of his fortune, but also set up a $2 billion foundation for each of his children to manage. Other famous people who have chosen this approach include: Bill Gates (Bill Gates) who announced that he will give most of his wealth to society by 2045, leaving only a small portion for his children, or Mark Zuckerberg (Mark Zuckerberg) announced that he would give away 99% of his Facebook shares when his daughter was born, as if telling her, "My birthday present is... no inheritance!"

Guidelines for action

1. Establish a foundation or Donor-Advised Fund
2. Let your children be on the foundation's board (to make them feel involved)
3. Write a letter of wishes explaining why you are not giving the inheritance (to reduce questions after you stop breathing). 

Style that 2 : “Mission-Locked”

philosophyThis type of inheritance division is: “My wealth is too great to belong to one person…it belongs to our “Mission”!” The core of this concept is the transfer of "control" of a company to a foundation or fund with a clearly defined purpose. This allows for long-term independence in pursuing the organization's mission, reduces conflicts over management power, and helps prevent descendants from selling the business, while simultaneously creating social benefits. This approach views family businesses as a legacy that must be preserved and continued from generation to generation (a crucial mission).

This approach is suitable for those who want to keep the business in the family but do not want their children to fight over management power. Simply put, it means that no one is an owner! Family businesses that choose this approach include: IKEA is held by the Stichting INGKA Foundation, a foundation with no direct beneficiary. Its assets are not vested in any one person, but are used to drive IKEA's mission and for charities, eliminating the issue of "which child will be the boss?" Or Bosch, whose Robert Bosch Stiftung holds approximately 94% of the shares and manages its social mission through dividends from the business, ensuring stability and a clear long-term direction for the business. Or Rolex, whose sole shareholder is the Hans Wilsdorf Foundation, is wholly owned by the foundation!

Guidelines for action

1. Establish a foundation with a clear charter (clear and without any room for children to interpret it in their own favor)
2. Separate voting rights from dividend rights (can give dividends but cannot interfere with management)
3. There is a mixed board of professionals and family members.

Style that 3 : “Stewardship”

Philosophy in this form is: “You don’t own these properties. You are just their temporary caretaker.” This concept views assets or businesses as not belonging to any one individual, but as something that must be maintained and passed on to the next generation. The key is to keep assets “in the family” through a shareholding structure or trust, separating the roles of “owner, manager, and family” from each other, and using family rules to reduce conflict and prevent family wars. The focus is on stability and continuity for the family business empire.

One such family that has chosen to pursue this approach is Li Ka-shing, who has allocated his eldest son to take care of the main business while his younger son gets the capital to start his own business, so that two tigers are not forced to live in the same cave.clan Walton (Walmart) using a Family Holdings Trust to control voting power, or the Ford family dividing their stock into two classes, with shares held by family members having more voting rights than shares held by investors to keep management power in the family.

Guidelines for action

1. Appoint a clear and prompt successor (eliminating uncertainty and giving employees and partners room to adapt)
2. Separate voting/dividend rights (balance between working and non-working shareholders in the family business)
3. Establishing the rules for trading shares between siblings and relatives (“Shareholder Agreement”)
4. Strategic asset division (avoiding joint ownership between siblings with different visions or abilities)
5. Use holding companies and trusts (to centralize control and protect assets)

Style that 4 : “Conditional Distribution”

The philosophy underlying this idea is: “I can give it to you…but you have to prove yourself first.This concept reflects the belief that children must prove themselves first, rather than adhering to the principle of "everyone is equal". It emphasizes fairness based on roles and duties, using legal tools to reduce friction. This philosophy often stems from parents' "starting from scratch" life experiences, which have given them a sense of pride in achieving success on their own. They also want their children to know the value of money and not to be "lazy high society" types.

Millionaires who adhere to this approach include: สติง (Sting), the British singer and songwriter who announced that his children would not inherit his $300 million fortune because he thought it would become a “stone weighing them down,” or the famous actor. Daniel Craig (Daniel Craig) or James Bond as we all know him, who thought, “How disgusting is it to give away an inheritance!”

Guidelines for action

1. Given when conditions are met, such as completing a degree and having a stable job.
2. Pay in installments according to the age/important events specified, such as when you reach 25, 30, 35 years of age, or when you get married, have children, or start a new business.
3. Set up a Family Bank (parents can lend money, but you must have a business plan, not a blank check!)
4. Write a Letter of Wishes explaining your reasons to reduce negative emotions and help your children understand that you are not being “mean,” but are “loving” and wanting them to “grow.”

Step 2: Prepare your tools (not just a will!)

Inheritance distribution these days is no longer just writing a will and putting it away in a drawer. It's like cooking: if you only have a knife and a cutting board, you might only be able to cut vegetables. But if you have a complete set of tools, such as a pot, pan, and oven, you can cook a variety of dishes that are more complex (to better suit your family's specific needs). The same goes for legal and financial tools: the more options you have, the more you can manage your inheritance and prevent problems. These tools include:

1. testament (Will) – It must be done legally, otherwise it will be invalid!
2. life insurance (Life Insurance) – Used to create liquidity to pay inheritance taxes (over 100 million, tax 5-10%)
3. Holding company (Holding Company) – Clear shareholding structure for easy transfer
4. Shareholders Agreement (Shareholder Agreement) – Specifies how shares will be traded between children and relatives.
5. prenuptial agreement (Prenuptial Agreement) – Protect family assets from divorce cases.
6. Preferred shares (Dual-Class Shares) – To design voting rights and dividend rights to be separated.
7. foundation (Family Foundation) – For families who want to do charity work, social missions
8. Foreign trusts (Trust) – A tool for passing on wealth from generation to generation (Thailand does not yet allow the establishment of trusts, so they must be set up abroad)

Step 3: Communicate clearly (don't throw a time bomb!)

We often don't like to discuss death and inheritance because we fear bad luck. But did you know that not discussing it is the real cause of bad luck? It makes our children and grandchildren have to guess, interpret, and argue after we are gone. Good communication is like defuse a bomb. The sooner you do it, the safer it is. Don't wait until it's too late and then regret it.

Guidelines for action

1. Start talking early – Don’t wait until you are so old you can’t speak or until you are so sick you can’t talk.
2. Explain the reason – Why is the distribution not equal? ​​Why are there conditions? Don’t make your child guess.
3. Please read the will before signing. – Buffett insists this is crucial to preventing the question “Why?” after a parent’s passing.
4. Hold regular family meetings – Discuss business and inheritance openly.
5. write Letter of Wishes – Explain the values ​​and hopes you have for your children and the family business.

Step 4: Avoid the traps (that most people fall into).

A perfect inheritance is full of pitfalls, like a Mario game where you have to jump over holes, avoid turtles, and collect mushrooms. If you're not careful, you can easily fall into holes or get bitten by turtles. These traps are often hidden in small details that we might overlook, but when problems arise, they become big problems that are difficult to fix. Let's see what traps you need to watch out for.

A trap that 1: “Equality” vs. “Fairness”

As for the issue of "salary" or "bonus," don't think that giving equal amounts is fair. Children who are dedicated to the family business should receive more than children who are not involved in the family business (they don't work from home, so they shouldn't receive a salary from the family business anyway). This isn't favoritism, but rather a systemic approach. Regarding "shares," whether or not equal amounts are determined by several principles and tools (refer back to step 1).

A trap that 2 : Regardless of taxes

Inheritance tax in Thailand may not seem like much (5-10% for inheritances over 100 million), but if the assets are in a form that is difficult to sell (e.g., land, shares in a closed company), heirs may have to sell the assets to pay the tax.

A trap that 3 : No liquidity

Don't keep all your assets in the form of hard-to-sell real estate or stocks. Have a reasonable amount of cash or assets that can be easily converted to cash.

A trap that 4 : Forgot to update

Laws, family circumstances, and property values ​​change all the time, so it's best to review your estate plan every three to five years.

Step 5: Choose the approach that suits your family.

After exploring all the options, it's time to decide which method to use. It's like choosing a spouse for your child: consider suitability, not just based on looks or wealth. Consider personality, compatibility, and the future. Similarly, choosing an inheritance distribution method requires careful consideration of all aspects. Don't just choose because others have done it or because it looks good on paper. Instead, choose one that truly fits your family's DNA.

If your family…

Have a social mission or want to plan your taxes?

• Choose the approach of “giving back to society” or “locking the business with a mission”
• Suitable for families whose children may not have a passion for business but are ready to participate in social activities.

Want to build a business empire to be passed down from generation to generation

• Choose the “caretaker succession” approach
• Suitable for families with large businesses and heirs ready to continue the family business.

I want my child to grow up on their own two feet.

• Choose the “conditional allocation” approach
• Suitable for parents who have built their careers from scratch and want to instill values ​​of hard work.

Good estate planning doesn't start with the question, "How much should I give my children?" but rather, "What kind of person do we want our children to be and what kind of life do we want them to have?" And remember:

• Too much money It may destroy the motivation of children.
• Too little money It may leave them with no chance to develop themselves.
• Lack of communication It is the root cause of almost all conflicts.

And most importantly… remember that what you leave your children isn't just your money, it's your values ​​and your life example. Good luck to all of you in designing a legacy that won't break up your family. And remember, if your children and grandchildren fight over inheritance, they might not come to pay their respects to you on Qingming Day!

Warning : This article is for general guidance only. Consult your legal and financial advisor before making any decisions, as every family is complex, the details are different, and laws are constantly changing.!

References:

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