Balancing fairness: Succession planning for business owners with children 

For many successful business owners, the hardest part of succession planning isn’t the financial or tax aspects, but the family dynamics.

One child may be heavily involved in the business while others have built careers elsewhere. Add marriages, stepchildren, and so on, and a technically efficient plan could fail on ‘fairness’.

Keep reading to find out how to create a plan that balances fairness while protecting your business and family relationships.

Fair is not always equal

You might think treating your children the same by splitting business shares equally is the fairest approach. However, in some situations, equal ownership could create conflict that damages relationships and the business.

Imagine that one of your children has devoted years of hard work to your company, while the others have not participated at all. Giving them the same ownership rights could create resentment, stall important business decisions and force responsibility on a child who has no interest in playing an active role in the business. 

Fair succession planning takes individual circumstances into consideration by addressing questions such as:

• What has each child contributed?
• Who has the skills, knowledge and motivation to run the business?
• Do you have children who will need ongoing support?

6 planning strategies to balance fairness

Every family business is unique in how it’s structured and managed, so it’s important to create a succession plan that meets your specific circumstances and goals.

Here are six options to consider and discuss with your financial planner.

1. Give different share classes to participating and non-participating children

Instead of giving each child the same type of share, create different share types with distinct rights attached. For example, you might give children who are active in the business voting shares and those who are not involved non-voting growth or dividend shares.

This ensures all your children have a stake in the business, but operational control remains with those in the best position to make day-to-day decisions.

2. Set up a family investment company (FIC)

FICs are a powerful tool for high net worth (HNW) families who want a flexible way to manage wealth across generations and plan succession in a way that feels fair to all children.

A FIC is a private company set up to hold, manage and grow wealth. They’re usually created by parents or grandparents who act as directors and shareholders, retaining control over everyday decisions. Children or grandchildren own different share classes, typically with limited or no voting rights but entitlement to some financial benefits such as dividends.

A FIC promotes fairness because it allows you to customise each child’s involvement. For example, you could gradually pass more control to a child who is involved in the business over time.

Read more: Why family investment companies are back in the spotlight

3. Match the value of business interests with other assets and life insurance

Balance the value of business shares given to one child by passing on other personal assets – such as property, pensions or investment portfolios – to a child who’s not involved in the company. 

You might also want to consider putting life insurance in a trust for them. This could be a tax-efficient way to equalise inheritance between your children.  

4. Use trusts to hold shares for younger, vulnerable or non-participating beneficiaries

Trusts allow shares or other assets to be managed on behalf of beneficiaries, rather than being given outright.

As such, they could be an effective way to provide financially for children who are younger, vulnerable, or not involved in the business without handing over immediate control or risking mismanagement. 

5. Create robust governance documents

Clear and coordinated governance documents are essential for HNW business-owning families. These include:

• Shareholder agreements
• Wills and trust deeds
• Letters of wishes

Together, these documents turn your intentions into clear rules that protect your business and your family. This could reduce the risk of conflict, deadlock or unintended outcomes after you die or step back from the business.

6. Communicate your plan openly with family 

Open conversations about succession are crucial. 

If your children understand the reasoning behind your plan, they’re less likely to feel resentful or challenge the arrangements you have made, even if they each have a different inheritance.

Moreover, talking to your family as early as possible gives them time to ask questions and express concerns. You can then work through any issues together. This way, everyone knows what to expect, and there are no unpleasant surprises, which reduces the risk of misunderstandings or costly disputes later. 

Creating a coherent, workable succession plan that meets your family’s needs and that of the business can be a complex and daunting task. Your financial planner can help by reviewing your entire estate, modelling different ‘fair not equal’ scenarios and coordinating with our colleagues in PKF Francis Clark across many specialities to help with your situation, including the business advisory team, the tax team and the trusts and estates team.

We work together seamlessly so all your financial planning, business and tax advice are dealt with under one roof. We can also support you in communicating your plan to your children, so expectations are clear and conflict is minimised.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, or trusts.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.