The family business: Anticipate to pass on the family heritage

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SINGAPORE: Globally, approximately US $ 15.4 trillion in family wealth is expected to be passed from generation to generation by 2030. Of this amount, approximately 12% or US $ 1.9 trillion will be transferred to Asian heirs, according to research firm Wealth-X.

According to Forbes, there was a record 2,755 billionaires in 70 countries around the world in 2021. Of these, more than 40%, or 1,149 billionaires, were from the Asia-Pacific region.

At the heart of wealth creation in the region are family businesses in Southeast Asia.

While many newly created billionaires derive their wealth from relatively young companies, a number of Asian founders are reaching retirement age.

Hence the growing need for planning the transfer of wealth.

Professor Mandy Tham is Academic Director of the Master of Science in Wealth Management, Lee Kong Chian School of Business, Singapore Management University.

She warns against the consequences of not having a formal structure for inheritance and transfer of assets: “Anything that could go wrong, would go wrong. Because it’s a family business, we can have the family destroying the business or the business destroying the family. We don’t want any of that.

One of these structures that is growing in popularity is the family office. These private wealth management companies cater to ultra-wealthy families and help set up frameworks for estate planning and transfer of wealth.

They allow family members to separate the family patrimony from the family business, thus sequestering part of this patrimony.

At the end of 2020, there were around 400 single family offices operating in Singapore.

Business families typically create wills, trusts, or holding companies as part of planning for the transfer of wealth.

But family offices can be used for specific purposes such as asset management, philanthropy, or tax advice.

These offices can be staffed with professionals, if the family feels comfortable outsourcing such decisions.

Others may prefer to retain more direct family control.

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