Son of late French singer Johnny Hallyday David Hallyday (1st-R), daughter Laura Smet (2nd R), Johnny's wife Laeticia (4th-R), their daughters Jade (5th-R) and Joy (3rd-R) stand by the coffin outside the Eglise de la Madeleine (Madeleine Church) at the start of the funeral ceremony for their late father and husband on December 9, 2017 in Paris. French music icon Johnny Hallyday died on December 6, 2017 aged 74 after a battle with lung cancer, plunging the country into mourning for a national treasure whose soft rock lit up the lives of three generations. / AFP PHOTO / POOL / ludovic MARIN (Photo credit should read LUDOVIC MARIN/AFP via Getty Images)
David Hallyday and Laura Smet (right and centre) attend the funeral in Paris of their father Johnny Hallyday, the French rockstar, along with his wife Laeticia Hallyday (left). His US will left everything to his wife, but the children successfully challenged it in France, where they cannot by law be disinherited © AFP via Getty Images
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Few people like to contemplate their own mortality. While this may be fine on a spiritual level, it has grave consequences when it comes to practical realities such as writing a will. The results can be bad enough in an averagely well-off family, perhaps with one home in the estate, a couple of bank accounts and a mutual fund holding. But for a wealthy family, especially one with assets spread around the globe, the impact can be much worse.

All the usual arguments between potential heirs can be magnified by the scale and complexity of the legacy, increasing the risks of court cases and even of cross-border clashes between different jurisdictions. For those in charge of operating businesses, the stakes are even higher — a lack of succession planning can undermine management and jeopardise profits and jobs, possibly for years.

You would have thought, then, that the rich would take more care with their wills. Not so. A survey of family offices by Campden Research and UBS bank found only 32 per cent of the world’s rich have a formal written succession plan. With another 24 per cent having either an informal written plan or one that is verbally agreed, only just over half of those polled have some kind of scheme in place. The rest do not.

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By region, old-money Europe is slightly better organised than Asia, with its growing newly minted fortunes. But the failure to deal with death is global. Bankers say it applies especially to first-generation business people, who are often particularly self-confident, if not arrogant. “They don’t want to talk about it because they believe they will never die,” says one private banking head.

The lack of a succession plan can raise specific business questions, notably decisions about long-term investments. Much more important are basic questions of inheritance — who takes control, when and how. Preparing a succession plan and writing a will involves facing up to the possible conflicts among heirs, securing the interests of non-heirs (including, perhaps, spouses and ex-spouses) and balancing emotions with hard-headed logic.

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In families where the core of the fortune is still a big operating group, it is crucial to select the right person to run the business. While tradition in many regions often favours an eldest son, a younger sibling or a daughter may be better equipped for management. Or someone else altogether — a non-family professional executive perhaps, even as ownership of the assets still passes to family heirs.

Preparing a succession plan will not necessarily eliminate the risk of conflict. But it will at least allow conflicts to take place in a framework.

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Ultimately, succession plans are subservient to the law. But which law? Wealthy families often have homes, operating companies and financial assets in different countries. The legal approach to succession may differ fundamentally, a point highlighted by the dispute over the estate of the late French rock star Johnny Hallyday.

45

the average age of taking control of family wealth

The singer wrote a will in Los Angeles, where he spent much of his time, leaving everything to his wife Laeticia, as allowed under US law. But his two eldest children successfully appealed to a French court, which ruled that, as a French national, Hallyday was bound by French law — under which children cannot be disinherited. So there are now five heirs — the widow, the litigants and two younger adopted children.

The dead cannot evade the law any more than the living. But prudent succession planners can make timely decisions about their domicile and even their nationality, and the location of key assets.

As always, it will be necessary to hire lawyers and pay their not insubstantial fees. But the pain and cost of doing things right are far outweighed by the potential pain and cost of doing things wrong. Or of doing nothing at all.

Stefan Wagstyl is editor of the FT Wealth magazine and Financial Times Wealth Correspondent

Follow Stefan on Twitter @stefanwagstyl

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