The news of the passing of Ingvar Kamprad, founder of Ikea this week sent lovers of the furniture super stores into mourning. But the realisation that that one of the world’s wealthiest people had passed away also had those in the legal fraternity around the world looking into the realities of inter-generational wealth transfer.
The concept of passing wealth from one generation to the next, or the wider family should seem like a simple matter. A will, along side some slightly more complex structures generally form an overall plan. However the reality of wealth means the complexities of succession planning generally increase the greater the wealth is. Not only in structure, but in demand by the beneficiaries.
So when we hear in this article from Bloomberg, that the 91-year old Swedish ‘father of flat pack’ removed control of the world-wide furniture behemoth out of his family’s reach, we suddenly have visions of a long line of lawyers queuing up to represent the family.
In Australia, the concept of inter-generational wealth transfer is one that seems to be under-rated by many. The simple conversation between parents, and often adult children can, in more cases than not, resolve any burning issues well before death. But even a will and a solid fireside chat with your folks may not result in a clear cut resolution to the estate. As we all know, emotions are a driving force in many estate-related disputes. And emotions can be at their highest when a wealthy loved one has passed.
As a financial adviser, I hear far too often that “I’ll leave that to them [my children] to sort it out”, when faced with the question of their succession planning. This lack of care, or even emotional detachment, from the transfer of wealth may seem frivolous, but is it more a reflection of reality than naïvity? In other words, “why should I tell them what to do with my wealth when I won’t need it, and they’re just going to fight over it anyway?” The general result being that the deceased chooses not to air their personal wishes for fear of upsetting someone while they are still alive, and the estate ends up in mediation or other legal proceedings to find a resolution.
This lack of care, or even emotional detachment, from the transfer of wealth may seem frivolous, but is it more a reflection of reality than naïvity?
Ingvar Kamprad’s choice to place Ikea in the hands of an independent foundation ensures the business continues to grow and thrive, no longer as a Kamprad family-controlled company, means that Ingvar became a realist many years ago. He removed the opportunity for his family or others to squabble of his fortune, and instead ensured the longevity of his other ‘baby’ for many years to come.
For once emotions come into consideration, the conversation changes to how many generations it takes to dispose of most family wealth. While a story for a different day, some say one generation can ruin it all. Others are a little more forgiving, suggesting it takes two generations to stuff it up. Data has shown that 90% of family wealth is often gone after three generations.
So put out your allen keys and celebrate the life of the founder of your Billy bookcase, knowing that Ingvar Kamprad’s legacy means that your children, and even your grandchildren will one day kit out their first, and perhaps also their last home with the same furniture that you did when you were young. And while you are enjoying another glass of wine and screwing together yet another shelving pack, invite the family over for an ‘Ikea party’ and have a chat about what they want, and expect from their wealth once they have gone.
Robert Carson, SACC Melbourne Board Member