Fair is not always equal: succession planning for family business owners

For many successful business-owning families, succession planning is not simply a question of who receives what or equal division. It is a question of what is fair and how ‘fair’ is quantified and that will be unique to each family and their business journey. This is a conversation we regularly have with clients and the distinction between equal and fair matters, especially where one child has committed their career to the family business and another has chosen a different path. In those circumstances, an equal division of the estate may feel simple on paper, but it may not reflect the contribution, risk, responsibility or future needs of each child — nor the need to protect the business itself.

For high-net-worth families, the challenge is to balance family harmony, commercial continuity and tax-efficient estate planning. That balance usually requires a more nuanced conversation than “equal shares for all”.

Why equal is not always fair

A family business is rarely like a bank account or investment portfolio. It may be difficult, or even damaging, to divide it equally between children. Splitting shareholdings equally can create deadlock, dilute control, or leave a child who is not involved in the business with ownership rights but no real appetite for the responsibility that comes with them.

Where one child works in the business, they may have spent years helping to build its value. They may have accepted a lower salary, carried personal pressure, taken commercial risk, or made sacrifices that other siblings have not. Leaving the business to that child may therefore be entirely fair, even if it is not mathematically equal.

Equally, the child who is not in the business should not be overlooked. They may still have an expectation of inheritance, a need for financial security, and an emotional interest in being treated with respect. Fairness means acknowledging both positions.

The questions families should ask

Before deciding how assets should pass, families should step back and consider a number of practical and emotional questions:

• Who is best placed to lead or own the business in the future?
• Does the child working in the business want control, income, or both?
• Would equal ownership create tension between siblings?
• What assets are available outside the business to provide for the child who is not involved?
• Should life insurance, trusts, pensions or investment assets be used to help balance outcomes?
• How will decisions be explained to the next generation during lifetime, rather than discovered after death?

These conversations can be difficult, but they are often far less damaging than silence. Many inheritance disputes arise not because a plan was unfair, but because it came as a shock.

Protecting the business as well as the family

For business-owning families, succession planning should not be considered in isolation from the company’s governance. A Will may say who inherits shares, but it does not necessarily answer how the business will be managed, who will have voting rights, what happens if a shareholder wants to exit, or how dividends should be approached.

Shareholder agreements, articles of association, family charters and governance policies can all play an important role. They help ensure that ownership, control and expectations are aligned. This is particularly important where one sibling is active in the business and another is a passive shareholder or beneficiary.

The aim is not simply to transfer wealth, but to preserve the value of what has been built and reduce the risk of family disagreement undermining the business.

Using other assets to create balance

Where one child is to inherit the business, parents often look for ways to provide fairly for their other children. This might include leaving non-business assets, such as property, investments or cash, to the child who is not involved. In some cases, life assurance can be used to create liquidity. Trust structures may also provide flexibility, particularly where parents want to protect assets while allowing trustees to respond to future circumstances.

For larger estates, inheritance tax planning is also a significant consideration. Business and agricultural reliefs, lifetime gifting, trusts and other succession strategies may all be relevant, but the rules are complex and subject to change. Families should take tailored advice before making decisions, particularly where substantial business assets are involved.

Communication is part of the plan

A technically sound succession plan can still fail if it is not understood by the family. Parents may avoid discussing their intentions because they do not want to cause upset, but a lack of communication can create exactly the uncertainty they are trying to avoid.

Explaining the reasoning behind decisions can help children understand that unequal does not necessarily mean unfair. It can also give them the opportunity to raise concerns during lifetime, when solutions can still be found.

For some families, this may involve a carefully managed family meeting. For others, it may be better to start with separate conversations. The right approach will depend on the personalities involved, the history of the business and the wider family dynamics.

A fair plan is a bespoke plan

There is no single right answer. In one family, fairness may mean equal financial value. In another, it may mean passing control of the business to the child who has earned and is capable of taking that responsibility, while making separate provision for others. In another, it may mean delaying final decisions until the next generation’s circumstances are clearer.

What matters is that the plan is intentional, properly documented and regularly reviewed. Family circumstances change. Businesses grow, sell, restructure or diversify. Children’s needs and ambitions evolve. A succession plan should evolve too.

How we can help

We work with business owners and high net worth families to create succession and estate plans that reflect their values, protect their wealth and support long-term family harmony. That may involve reviewing Wills, considering trusts, coordinating tax advice, aligning company documents, preparing Lasting Powers of Attorney, and helping families approach sensitive conversations with confidence.

If you are considering how to pass on a family business, now is the time to start the conversation. Fairness does not happen by accident. It is planned, explained and carefully structured.

Have a question or want to continue the conversation? Contact Nicola Walker today at Nicola.Walker@privateclientsolicitors.co.uk or 0161 509 5020.