The author, a partner at the law firm Maurice Turnor Gardner, specializes in tax and succession planning. Over the years, I have learned that the answers to a business owner’s tax-planning inquiries do not always align with their goals for succession planning.

One vivid case stands out in my mind: an entrepreneur who deeply regretted implementing a succession plan. For various commercial and political reasons, this patriarch found himself compelled to relinquish legal control of his thriving business empire. Following professional advice, he made the decision to transfer the shares of his enterprises into a trust. This trust was to be managed by competent and reputable trustees, who would operate under a clear mandate regarding the management of the business.

The concept of trusts is not particularly novel; in the UK, trusts have long been utilized to transfer the legal ownership of assets while allowing the original owners to retain some measure of control. This arrangement separates the economic benefits of the assets from their legal ownership, a practice that has its roots in centuries of legal precedent. Thus, the patriarch followed this traditional route and entrusted his shares to carefully selected trustees.

Initially, these trustees took a hands-off approach. They acted as shareholders without significantly interfering in the day-to-day operations of the business empire, which remained firmly in the hands of the patriarch. As the next generation became involved, they leveraged their energy and fresh perspectives, further propelling the business forward.

However, tensions soon emerged. A significant rift developed between the patriarch and his children, who viewed business operations through a drastically different lens. The father's vision clashed with the modern, 21st-century approaches of his offspring, leading to frustration and anger on his part.

Because he had ceded all control to the trustees, his ability to influence business decisions diminished considerably. This loss of authority has resulted in a profound schism within the family, leading to disputes that are difficult to observe. While legal fees continue to mount, the trustees maintain their distance, adhering to their responsibilities and refusing to comply with the patriarch’s directives regarding the business's management.

With a heavy heart, the patriarch laments his decision to grant control to the trustees, despite the tax and commercial rationale that initially seemed so sound.

It’s important to clarify that this account does not refer to high-profile families such as the Roys from the popular show 'Succession' or the Murdoch family, who are recently entangled in legal battles in Nevada. Instead, this situation resonates with many families experiencing generational transitions in their businesses.

Much advice exists concerning the challenges of tax planning for business owners: strategies such as transferring ownership, establishing trusts, and creating varied share classes to manage value are among the recommendations. However, while these strategies may be technically sound, they often overlook a crucial element: the human aspect of the dilemma.

Many first-generation business owners are reluctant to relinquish control of their creations. They have poured their hearts and souls into these enterprises and often prefer to keep things straightforward, avoiding the complexities introduced by trustees or other family members.

There is a distinct difference between the emotions experienced by first-generation founders and those who inherit businesses. Founders take pride in their hard-fought successes, while heirs often bear the weight of custodianship, feeling an obligation to preserve the family legacy without being the one to squander it.

In my observations, many first-generation patriarchs pay lip service to the idea of preserving the family business for the next generation. They may contemplate succession planning, but only to the extent that they can maintain control during their lifetime, and even beyond.

As someone who has long advocated for the use of trusts in estate planning, I find myself questioning whether they are truly the solution to life's complexities. Recently, trusts have come under increased scrutiny due to their association with tax avoidance, money laundering, and the concealment of assets from spouses or creditors.

In many cases in the UK, settlors and beneficiaries face punitive tax implications unless the assets in question hold 'tax-favored' status. While trusts can serve a protective role, particularly for vulnerable individuals, one must wonder if entangling family businesses within such structures is wise.

As one client’s son candidly expressed, “By creating this web of trusts and extraordinary complexity, my father is signaling to me that he does not trust me.” He argued that it would benefit the family dynamics if wealth were allowed to flow naturally through generations, free from the constraints of trusts. He believed each generation should be allowed to learn from their own mistakes, fostering growth and resilience.

For business owners feeling pressured to adopt a succession plan, I urge you to consider the merits of doing nothing. There is wisdom in respecting your instincts; if you're uncomfortable with the idea of a complex succession plan, perhaps it’s best to wait and rethink your strategy.