By Jonathon Tainsh – Senior Financial Adviser, People + Partners Wealth Management

By Tatum West – Senior Manager, People + Partners Wealth Management Tax & Accounting

“Wealth rarely survives three generations.”

You’ve probably heard that before. Here’s the data behind it:

• A 20-year study of 3,200 wealthy families found that 70% lose their wealth by the second generation, and 90% by the third.
• Of the 4,000 US millionaires recorded in 1900, only a handful have billionaire descendants today—despite the fact that $1 million invested sensibly in the US stock market back then could be worth well over a billion dollars today.
• In almost every case, the cause wasn’t bad investments or tax bills—it was family breakdown, poor planning, and a failure to prepare the next generation.

This isn’t folklore. It’s a pattern seen across cultures and continents, across business owners, retirees, and high-income professionals.

At People + Partners, we work with clients to break this cycle.

We help families grow, manage, and protect wealth—across generations.

Here’s what it takes to get it right.

The Overlooked Risk: Family Dynamics and Unprepared Beneficiaries

Succession planning is about more than tax—it’s about people.

The most common (and costly) breakdowns happen not on a spreadsheet, but around the family table. Misaligned values. Silent assumptions. Unprepared beneficiaries. Generational conflict.

In our experience, the biggest threat to lasting wealth is lack of readiness—not just legally, but emotionally and practically.

We’ve seen:

• Beneficiaries handed control without context or confidence
• Siblings with different values, priorities, and expectations
• Founders reluctant to let go or reluctant to have the hard conversations

Without a shared purpose and a sense of stewardship, even a well-built structure can collapse.

That’s why we often begin with the softer side of planning—before layering on strategy, tax, and structure.

The ATO Is Watching—and With Good Reason

While family readiness is crucial, ignoring the technical side is also risky.

The ATO has made it clear: succession events are firmly on their radar.

Their Private Wealth division is focused on high-net-worth families, especially those with trusts, businesses, and intergenerational transfers.

Without proper oversight, the risks include:

• Division 7A breaches – If a private company loans money to a shareholder or their associate (such as a family member) without a proper loan agreement, the ATO may treat it as an unfranked dividend, triggering unexpected tax bills.
• CGT liabilities – Transferring or restructuring business and investment assets without a clear tax strategy can lead to significant capital gains tax liabilities.
• Invalid trust distributions – Distributions that don’t align with the trust deed or resolution requirements can be challenged by the ATO or lead to double taxation.

These aren’t just technical oversights—they’re signals of governance weakness. And they can lead to audits, penalties, and reputational damage.

Five Warning Signs Your Succession Plan Isn’t Ready

We review succession structures every day. Here’s what we look for—and what signals risk:

1. Outdated or Incomplete Estate Plans

Wills are often seen as the whole plan. They’re not.

Assets in trusts, companies or super often fall outside the estate. That means:

• Non-binding or missing super nominations = super paid to unintended recipients
• Old trust deeds = no clear appointor succession
• Company constitutions = silent on director changes

If your documents don’t align across structures, control can shift unintentionally.

2. No Clear Line of Control

Who becomes trustee when you step down? Who replaces a director of the corporate trustee?

Control is everything.

Without clear succession of appointor or trustee roles—documented and agreed—you risk confusion, delays, and even litigation. And the ATO views ambiguity as a red flag.

3. Tax Traps Lurking in the Background

Succession events often trigger tax consequences:

• Asset transfers
• Loans
• Restructures
• Company dividends and trust distributions

If these aren’t mapped properly, you could walk into Division 7A or CGT issues that erode wealth fast.

4. Unprepared Beneficiaries

The biggest risk to intergenerational wealth? Lack of readiness.

We’ve seen inheritors with no financial literacy, no context, and no shared vision. The result is fragmentation, poor decision-making, and rapid erosion of wealth.

Financial literacy and shared values aren’t “nice to have.” They’re essential.

5. No Governance or Family Strategy

Most families don’t fail because of tax or legal mistakes. They fail because they haven’t defined who they are—or where they’re going.

We help clients put in place:

• Family charters
• Investment policies
• Regular family meetings
• Roles and decision frameworks

These aren’t bureaucratic tick-boxes. They’re what allow wealth to endure.

The Hidden Risk: Family Dynamics

Even with perfect tax and legal documents, family tensions can derail everything.

That’s why we recommend open, facilitated conversations—ideally before the handover, not after.

Discuss vision, roles, expectations, values. This is where succession becomes more than a transaction—it becomes a legacy.

Where Wealth Strategy and Tax Planning Must Meet

Succession planning only works when the advice is coordinated.

Most firms do this in silos. We don’t.

We bring together:

• Tax: CGT, Division 7A, trust distribution strategy
• Legal: Entity control, estate planning, succession documents
• Wealth: Super, investment structure, risk management, retirement planning
• Governance: Education, communication, family engagement

When everyone’s in the same room, the plan is stronger—and the outcome, more enduring.

Wealth That Lasts Means More Than Just Money

True succession isn’t about handing over assets. It’s about transferring capability, clarity, and purpose.

That’s how you defy the 90% statistic.

If you’re not confident your current plan, documentation and structures will stand up to change, scrutiny, or complexity—it’s time to talk.

We’re here to help.

Disclaimer

People & Partners Wealth Management Pty Ltd ABN 67 127 250 613 is a corporate authorised representative of Fortnum Private Wealth Ltd ABN 54 139 889 535, holder of Australian Financial Services Licence (AFSL) No. 357 306. The content of this article is for general informational purposes only and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation, or needs. Any advice we provide will be detailed in a formal advice document. The opinions expressed in this article are those of the authors at the time of writing and should not be taken as a recommendation to act. To the extent permitted by law, Fortnum Private Wealth Ltd and its associates accept no liability for any loss or damage incurred as a result of reliance on this communication.