Rich families in the West have grappled with the issue of wealth not surviving the third generation much longer than wealthy Malaysians. They recognise that wealth does not survive the generations because of a combination of issues — from poor planning and a lack of values to heirs who are not prepared for the windfall of their inheritance.

In the West, they have even developed an industry around advising the newly wealthy on how to ensure that their legacy survives more than just a few generations. This involves a combination of the hard stuff — like structuring a trust to control how the money is passed down and to prevent the money from being squandered at once — and the soft (but important) stuff, such as ensuring effective communication and trust between family members.

In an interview a few years ago, Dr Aziz Hassan, a specialist in family business succession and wealth preservation strategies, said successful business owners should structure their businesses well to ensure that there is no infighting. “Professionalise the management, make sure the children coming in are there because of their capabilities. And differentiate business assets from personal assets,” he added.

“Of course, you can give your children shares in the company. But if they do not have the capacity to run it, you might as well sell it and distribute the money. Otherwise, you will have problems and when you are gone, they may not be able to sell it if they are fighting with each other, and the business will lose its goodwill.”

He said that in Europe, the US and Australia, there is a class of advisers known as family business consultants, who help business owners think through their issues. “Someone has to help them put down all their issues and prioritise them. They need the kind of hand-holding that is not yet available in Malaysia.”

It is only after they have resolved these issues that they go to a lawyer. “The lawyer comes at the end, when they have decided what they want to do,” he said. As this involves families, you may need someone like a family counsellor to get involved. 

It is not only important to raise financially literate children (who are, among other things, trained to delay gratification) but also to bring on board outside advisers to ensure that they are not taken advantage of by their friends. These advisers include investment managers, tax preparers, estate planners and trust lawyers as well as mentors for the next generation. This advisory board comes in handy if your child is generous to a fault and his friends and classmates keep approaching him for contributions to investment schemes and business start-ups.

Finally, it is important to have a legacy that is more than just the money. This includes passing down the right values, prioritising harmony between family members (more wealth is lost through family feuds than extravagant habits) and ensuring that all the members of the family are taught to contribute and make a difference to society, thereby building up real wealth that cannot be squandered.

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