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Succession planning

How family enterprises can address succession planning amid complexity

17 March 2025 • 10 mins read

Family enterprises must adapt their succession planning approach to help preserve wealth in an increasingly sophisticated landscape.

In brief

  • Family enterprises seek a smooth succession that preserves legacy strengths and long-term business value.
  • But the size and sophistication of assets, modern family structures and diverse ambitions of the next generation make the process highly complex.
  • Robust succession planning, an effective governance framework and family offices can help families to better protect wealth.

According to Wealth-X, US$18.3 trillion of collective wealth globally will be transferred by 2030, of which around US$2.5 trillion will be handed over in Asia. As traditional businesses adapt to both the digital era and modern family structures, what tools and strategies should family enterprises consider to support succession planning?

Desmond Teo, EY Asia-Pacific Family Enterprise Leader; Spencer Hsu, Associate Partner, Private Tax Services, EY Corporate Advisors Pte. Ltd.; Jiawen Guo, Head, Family Office & Structuring Solutions, Bank of Singapore; and Lynn Ong, Family Office Advisor, Family Office & Structuring Solutions, Bank of Singapore, share their insights.

How early should family businesses start thinking about succession planning?

Desmond Teo: It’s never too early. Having the conversation long before the current generation is planning to retire is extremely valuable. Early leadership transition helps family enterprises stay relevant and grow as the next generation brings fresh ideas while still benefiting from the patriarch’s or matriarch’s experience and guidance.

The last thing you want is to have a succession unexpectedly thrusted into the hands of the next generation due to an untimely death or an irreconcilable family dispute.

In fact, the best time to start the succession planning conversation is when emotions are not running high.

Desmond Teo

Jiawen Guo: I agree. Many families wait until conflicts arise before making formal succession plans. However, it’s far more effective to plan and reach a common consensus during peaceful times while family relationships and ties are strong. Otherwise, people can be distracted by an issue at hand and find it difficult to see the bigger picture.


Some families may find it challenging to have this conversation due to sensitivities or they may be unsure how to approach the issues. This is when it may be helpful to bring an advisor into the picture. Difficult issues can be raised by a neutral party who isn’t emotionally involved and can genuinely be presented as being independent to help facilitate the discussions.

Jiawen Guo

What tools and arrangements should be considered when securing a family enterprise legacy?

Spencer Hsu: Multiple tools are available, including wills, trusts, insurance, family constitutions, family holding companies and single family offices (SFOs), which are ideal for families focused on investments or family affairs, such as education, family concierge and philanthropy. 

The combination of these arrangements typically depends on factors like the family’s objectives, number of generations or family branches, and the size and nature of assets under management.

Given that wealth creation within Asia largely happened within the past four decades, there is an increasing need for trusts, SFOs or family holding companies for Asian families that are more institutionalised, with a stronger focus on managing investments.

Spencer Hsu

What new questions should family enterprises consider when thinking about succession planning?

Lynn Ong: When families plan for ownership succession and the transfer of shares to the next generation, it may seem “fair” to distribute shares equally among the beneficiaries regardless of their involvement in the business. However, this approach can create challenges. For example, one child may actively contribute to the business while others pursue different careers or start their own ventures. Legal ownership not only grants dividend rights but also voting control, which can influence key business decisions. This can become challenging in times of shareholder disagreements or when passive family shareholders hold a majority vote, potentially impeding business operations. Beyond these concerns, families must also consider fairness in recognising the contributions of family members who work within and outside the business and the allocation of economic benefits.

Related to this, it is also crucial for families to assess the business’s long-term viability in light of the next generation’s aspirations. Traditionally, succession planning focuses on safeguarding continuity and transition of ownership, management and leadership from one generation to another within the family. However, other than an intergenerational succession of the business, alternatives — such as a sale or public offering — may provide a more suitable path forward if the next generation is keen to pursue interests outside the business.

Jiawen Guo: In terms of planning options, tools like trusts, which hold the company shares, are useful for separating legal ownership, control and management, and economic benefits. In this way, only family members actively involved in the business will have control over business decisions, but passive family members will still receive economic benefits through trust distributions. That said, trusts may not work for all families due to various reasons, including situations where there are foreign ownership restrictions or onerous tax implications. In such cases, holding companies — or foundations in some jurisdictions — may be a better option. Holding companies can be set up with different classes of shares to help achieve certain planning objectives. For example, a class of shares may carry voting rights but not dividend rights and vice versa. Or there may be a special class of shares that gives the patriarch or matriarch super voting rights.

In addition, insurance can be a useful tool to complement families’ planning. The liquidity created could allow certain family members to cash out their share and pursue their own projects. Where appropriate, tailored insurance planning solutions could also be used to address other planning needs for the family. These include but are not limited to the coverage of tax and other liabilities, estate equalisation needs, addressing keyman risks, and any philanthropic objectives or projects.

Some families have a significant portion of their wealth locked in illiquid assets, such as their family business. Liquidity solutions can help create cash flow for the family’s immediate needs and cater to family members who are not bequeathed ownership or control of the family business.

Where does personal wealth fit into succession planning?

Jiawen Guo: Besides their business assets, families should also consider succession plans for their personal wealth. These may be quite different from the succession plans for business assets, especially if there may be plans to appoint heirs to be business successors. An effective succession plan enables a smooth transition of both ownership and management while maintaining segregation of business assets and personal wealth.

When it comes to personal financial assets, families may choose to consolidate their financial asset holdings through a private investment company (PIC) that allows family members to be involved through bespoke shareholding and directorship structures. To further facilitate the orderly succession of assets held by the PIC after the current owner’s lifetime, families may consider holding the PIC through a trust. This can be useful to help address issues like incapacity planning, tax planning, wealth management and protection, and confidentiality.

How should families go about choosing an appropriate business successor?

Desmond Teo: In the past, succession planning was often based on cultural norms, such as having only male descendants take over the family business. But women are increasingly getting involved in businesses or investing in them. The last Asia-Pacific EY Family Enterprise Young Generation Leaders Program hosted an almost equal number of female and male leaders.

Often, a separation between ownership and management is seen in the second or third generations. Over time, families tend to grow faster than the business. There could be dozens of cousins. Not everyone can be directly involved in the business. Business needs may also outstrip competencies found within the family. In this case, the net must be cast wider than the family to find the commercial competencies needed to get excellent performance out of the business.

How can family enterprises keep up with modern digital trends while staying true to traditional values?

Desmond Teo: The upcoming generation of digital natives has different perspectives that can bring innovative ideas for adopting digital tools, adding revenue streams or changing business models. It’s a great thing to bring their thinking into the business early. However, a cornerstone of family enterprise success is a strong set of shared values. Those values may be slightly refined to reflect changing times, but fundamental values typically stay the same. It’s important that these continue to serve as the lodestar for the business while the next generation experiments with new ideas in a safe environment. Experiments should be sandboxed to support the “try, fail, learn” model of innovation — ideally when the previous generation is still there to guide new endeavors.

How can family members manage conflict resolution in a way that preserves cohesion and does not jeopardise the future of the business?

Desmond Teo: A key ingredient for a smooth succession is overcoming the mindset that business owners must work in the business. In this case, it’s so important to establish expectations early in terms of who in the next generation will be involved in the business. Family constitutions are extremely helpful in such cases. These documents spell out values important to the family, the ownership structure, a distribution policy, and employment criteria and conditions for family members. For example, these individuals may be remunerated based on market rates, with performance measured against what’s expected in the market.

In an instance, a family constitution made it clear that it was not a birthright to be involved in the business and that employment would be based on individual interests, strengths and availability. The siblings were educated in the family constitution from an early age. They understood that if one was chosen to lead, this was a responsibility to be borne on behalf of the rest of the family. It was a change of mindset that helped set the family enterprise up for success during generational change.

Preparing a family constitution today requires a modern conversation about the nature of the family. Are people recognised by birth, marriage or adoption? What will happen if a marriage breaks down? All these issues need to be considered in advance and rules must be agreed on to prevent the family enterprise from being damaged by conflict or uncertainty.

Family governance planning plays a crucial role in establishing a structured system for collective decision-making as well as checks and balances in relation to three key areas: the family, ownership, and the management of business interests and other assets.

Lynn Ong

Lynn Ong: Developing a framework based on clear guiding principles, policies and mechanisms can provide stability and alignment within the family, and this may sometimes be in the form of a family constitution. An effective governance framework enhances communication among family members, greatly reduces the risk of disputes and provides an approach to resolving conflicts as they arise. It should be designed with sufficient flexibility to cater for any future changes and ideally also incorporate the perspectives of the next generation. This goes a long way in allowing each family branch and the next generation to feel engaged and valued. It is also more likely to strengthen their commitment and shared responsibility for the future of the business.

What are the considerations when developing a family office structure to address wealth and family needs?

Lynn Ong: Wealthy Asian families are increasingly seeing the value of setting up family offices to enhance the sophistication of their investment management as their wealth grows in size, complexity and diversity. Beyond investments, family offices also play a key role in maintaining oversight of a family’s holistic wellbeing. For example, this may involve supporting the family’s wealth transitions and purpose of wealth, alignment of interests and risk management, and other strategic priorities like developing the next generation and managing liquidity events. 

When considering the establishment of a family office, it is vital to first define the family’s key objectives and assess whether a family office can address its needs. If so, it would be vital to structure the family office so that it serves the family’s future and long-term interests effectively. It is also important to consider family office governance in terms of both ownership succession of the structure and decision-making mechanisms. While family office governance differs from family governance, they are strongly interrelated and work together to support the family’s overall goals.

What are the advantages of including independent directors or advisors to strengthen corporate governance?

Spencer Hsu: Family offices are becoming increasingly more sophisticated in both their function and assets held. Depending on the availability of time or competencies among family members, families may require independent directors to come on board to offer different perspectives or professional advice, perhaps in real estate or philanthropy. Some families also seek independent members to provide mentorship for next-generation members. 

When choosing an independent director, look for a professional who is trusted and well regarded by the family. It might be an accountant, lawyer, banker or even a trusted long-time employee — someone who’s been working with the family for a long time with the right experience. Another challenge is finding the right balance between independent directors and family members on the board. In some instances, it may be useful to accord greater weightage to the views of independent directors so that their views matter in making board decisions. 

Bank of Singapore is the presenting title sponsor for the EY-Bank of Singapore Family Enterprise Award of Excellence 2025 and the EY-Bank of Singapore Asean Entrepreneurial Excellence Award 2025. The Bank of Singapore, a wholly owned private banking subsidiary of OCBC, is also the platinum sponsor of the EY Entrepreneur Of The Year 2025 Singapore awards.

Summary

A smooth generational succession does not come by chance. Family enterprises need to start exploring succession planning early as well as strategies and tools to help secure their family legacy and long-term business value.

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Author:
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Related issues:
Liquidity planningFamily office advisoryNext generation

Authors

Spencer Hsu

Associate Partner, Private Tax Services, EY Corporate Advisors Pte. Ltd

Desmond Teo

EY Asia-Pacific Family Enterprise Leader; Asia-Pacific EY Private Deputy Leader; ASEAN and Asia-Pacific EY Private Tax Leader

Jiawen Guo

Head, Family Office & Structuring Solutions, Bank of Singapore

Lynn Ong

Family Office Advisor, Family Office & Structuring Solutions, Bank of Singapore
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