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Why are affluent families turning to business succession planning turning to protect their assets and family fortune? Trusts and family trusts have been used in countries like Britains for years to protect their family assets, and the same could be said even today. Affluent families have been able to secure their fortunes and prevent the adage “wealth does not last three generations” by utilising the most effective business succession planning. Learn the benefits a trust along with the benefits of business succession planning. And pick out the ideal succession planning best practices amongst those used in the industry.

What is a Trust?

A trust is a legal arrangement or agreement which allows the settlor, someone who owns properties, to give away his or her assets to another person. This another person is called a trustee, and the trustee manages the assets given to him or her by the settlor for the benefit of the settlor’s beneficiaries. This arrangement results in the trustee becoming the legal owner of the property but the beneficial interests and enjoyment of the assets go to the beneficiary. This arrangement is made possible through the body of law referred to as equity.

How does a Trust help a business?

Doing proper business succession planning will entail families not just to have protection for their assets from creditors but also their business as well. Effective succession planning will result in a smooth transition of enterprise management. So, where does a Trust fit in this equation?

Trusts provide a vehicle to safeguard the family wealth, by putting down clear conditions before any heirs receive their inheritance. The fictional examples below shows the impact of not having a Trust and having a Trust.

Family Funds Squandered Away on Whims

Without A Trust

Mr Lim, the owner of a renowned hotel, dies due to a heart attack, his hard earned money from his business as well as his Hotel went to his son, Jason Lim since he died intestate. Mr Lim has had problems in dealing with Jason’s drug addiction. And after his untimely death, all his assets were passed to his son as dictated by the court. Without any experience in handling his father’s business, he let it crumble, and Jason spent his inherited money with parties, alcohol and drugs that led to him squandering everything his father had worked for on useless things. 

With A Trust

Mr Lim, an owner of a renowned hotel, dies due to a heart attack. Mr Lim had an estate plan ready, with a Trust in place to protect his assets and his business from his son’s ways. Mr Lim, puts his whole estate in his chosen Trustees hands, including making sure that his company continues to run. His trustees pick out able Directors to manage his hotel business, and it continues to prosper. His son Jason, on the other hand, drops his drug addiction ways in order to get his monthly allowance as stipulated in his father’s will. Mr Lim stated clearly in his Trust that Jason will get nothing unless he changes his ways. Jason, later on, finishes his tertiary education and takes over his father’s company, continuing Mr Lim’s legacy.

An Inexperienced Successor

Without A Trust

Mr Xie, a successful business tycoon, dies in a car crash, while he was heading to an important meeting. With Mr Xie’s unexpected death, his assets and businesses went to his wife Mrs Xie, someone who has no experience in handling business. Mr Xie had a sister, who knew how to handle a business, but because Mr Xie had no will, his assets and business went to his wife Mrs Xie, according to Intestacy Laws.

Mrs Xie tries her best to run the company, but since she has no knowledge as to how it works. Three years after Mrs Xie files for bankruptcy after making bad business decisions and failing to meet the investors’ standards. Two years afterwards Mrs Xie is forced to sell her house and move into a smaller apartment.

With A Trust

Mr Xie, a business tycoon, dies in a car crash, but because he has set up a trust and a will his assets were maintained by is chosen trust company. He named his sister as the successor of his company and placed the company under a trust with his wife Mrs Xie as a beneficiary along with his sister. His company does well under his able sister’s hands, and his wife is well provided for so long as she lives by the Trust he has set up.

Other Scenarios that a Trust Can Prevent

Well executed succession planning goals can also help prevent the following problems from occurring using a Trust.

  • Succession Problems – a Trust can help ease the transition of business leadership from one hand to another without the hassle of the probate court. By putting conditions like able family members taking part in a business and non-capable members being compensated with monetary benefits. Adding the condition of helping each other will also be beneficial for a business’s survival.
  • Different Interests – again conditions in a trust can help make a framework for a family goal that the settlor’s beneficiaries can try to uphold. A Trust can also offer a protection of family and business wealth from creditors and divorce.


Trusts and business succession planning should work hand in hand to keep a business afloat, whether it be a family business or an already established corporation. Effective succession planning can protect any business from the problems brought by family drama and probate court. And business owners should take it as a serious matter to develop a concrete business succession plan if they want to leave a legacy and not bankruptcy.

Do you have a business succession plan? Give us a call if you want to create a business succession plan for your family. If you want to learn more about estate planning, then be sure to grab a copy of “The Rockwills Guide to Succession and Trusts in Wealth Management”. Click the link below to buy the book