You’ve worked hard all your life, been successful, hired estate planners and prepared a will to ensure the family enjoys the fruits of your labour long after you’ve gone.

But if you don’t prepare your heirs as well, it’s very unlikely your grandchildren will have any share in the wealth you’ve created, says Roy Williams, a California-based researcher, author and coach who will speak on transferring family wealth and values at the National Symposium for Families in Business in Victoria, May 12 to 15.

Regardless of political system, culture or taxation regime, fewer than one in three families successfully pass on wealth to their children, says Williams. Grandchildren inherit family wealth only 10 per cent of the time.

In the next decade, leaders of more than three-quarters of Canadian businesses, which account for more than $1.3 trillion in annual sales, will retire – yet 70 per cent of these businesses have not selected successors, according to a 1999 survey by Deloitte & Touche Centre for Tax Education and Research.

More than 180,000 Canadians (31,000 in British Columbia) have $1 million US or more in assets to pass on to their families, said a 2003 World Health Report published by Merrill Lynch. “The number of businesses going from one generation to the next is just huge,” says Terri Heggum-Allen, national executive director of The Canadian Association of Family Enterprise (CAFE), host of the symposium. “Family businesses are the driver of Canada’s economic engine.”

Coaches such as Williams can help keep those businesses on track, generation after generation.

In order to understand why so few families successfully pass the torch from one generation to another, Williams collected data on 3,250 families who had made the transition. What he found was “just dumbfounding,” he says.

Only three per cent of failures could be attributed to professional errors regarding taxation, laws or preservation of wealth. Most issues that derail smooth transfer of wealth and values from one generation to another are within family control.

Sixty per cent of failures were due to breakdown in family communication and trust, and 25 per cent to inadequate preparation of heirs.

“We kept seeing excellent estate plans” undone by squabbling heirs, family infighting, hostility and unprepared heirs, he says.

By studying the thousand successful families, Williams developed a process families can use to better their odds, detailed in his book Preparing Heirs – Five Steps to a Successful Transition of Family Wealth and Values, co-authored by Vic Preisser.

The five steps are:

* Assess your transition plan. Begin by answering the 10 questions on the Wealth Transition Checklist (at left; a more detailed checklist will be available at the symposium). Families who answer yes to seven or more of the 10 questions share behaviours of families successful in transferring wealth; four to six yes answers indicate a family that could succeed if members work on trust and communication; three or fewer yes answers correlate strongly with failure.

* Develop an action plan to deal with outstanding issues. Choosing a family coach and practising skills to improve communication and trust will allow the whole family to become involved in the plan. The plan should detail roles for each family member, and which professional advisors will be consulted. Many families hire the best legal and financial advisors they can find, yet balk at having an outsider coach them on relationship skills.

“The John Wayne-Rocky scenario – ‘I can kill all the alligators and handle the bad guys all by myself’ – only works in movies,” says Williams. Parents can lead by example in declaring themselves beginners at some skill, like communicating clearly. This often is a relief to the heirs, who realize “we all play various roles at various levels of competence.”

Sorting out family issues now also ensures the founders are still around to advise, support and pass on their experience and prevent future heir squabbling.

* Prepare the heirs. Fully disclose the inheritance – that means telling them in advance about unequal distribution or unusual bequests – and what they must do to inherit. What role each member plays will depend on ability, reliability, responsibility and interest. Once family members can declare where they’re competent, and where they need help, a role for everyone can be planned. A plan with measurable accomplishments can be drafted to ensure family members acquire the skills needed to take the business forward after the leader leaves.

* Heirs prepare themselves: Making sure they have the aptitude for the role they’ll assume, getting suitable education and business experience, and finding mentors outside the company and developing supportive family business relationships.

* Evaluate and measure the family’s success in the first four steps.

Mentoring and coaching are powerful tools for business success, says Heggum-Allen. CAFE offers its 3,000 members a mentoring program and maintains a list of professionals, including coaches. “It has been such a success. More than 60 per cent of our members, twice the national average, are in businesses in the second generation or higher,” she says.

Other symposium speakers include:

* David Asper, executive vice-president of communications giant CanWest, whose founder Israel Asper died in 2003. He will discuss issues that affect second-generation leaders.

* Brandt Louie, CEO of HY Louie, which owns London Drugs and IGA grocery stores among other interests, is a third-generation family business leader who will discuss carrying family values through the third generation.

* Shirley Fulton-Duego and Lorraine Downey, fourth and fifth generation of the Fulton family maple sugar business in the Ottawa Valley, will discuss letting the younger generation follow their dreams and issues specific to women taking over the family business.

WEALTH CHECKLIST

* Our family has a mission statement that spells out the overall purpose of our wealth.

* The entire family participates in most important decisions, such as defining a mission for our wealth.

* All family heirs have the option of participating in the management of the family’s assets.

* Heirs understand their future roles, have “bought into” these roles and look forward to performing in those roles.

* Heirs have reviewed the family’s estate plans and documents.

* Our current wills, trusts and other documents make most asset distributions based on heir readiness, not heir age.

* Our family mission includes creating incentive and opportunities for our heirs.

* Our younger children are encouraged to participate in our family’s philanthropic grant-making decisions.

* Our family considers family unity to be just as important as family financial strength.

* We communicate well throughout our family and regularly meet as a family to discuss issues and changes.

– Source: Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, by Roy Williams and Vic Preisser

Web watch:
www.cafemembers.org
www.thewilliamsgroup.org