The wealth planning industry recently has been under scrutiny, often negatively and unfairly portrayed for its work with high-net-worth families across the globe. This perception, amplified by massive data leaks such as the “Pandora Papers” and the “Panama Papers,” has prompted certain media outlets to cast legal and highly sophisticated planning work done for families in an undeservedly nefarious light. Too often, prudent tax planning is mischaracterized as tax evasion, privacy labeled as secrecy, and asset protection as unethical—despite the fact that these strategies are designed and carefully executed under the laws of progressive and highly regulated U.S. trust jurisdictions.
Very much to the contrary, the work done in the wealth planning industry for families of extreme wealth is both virtuous and vital. When properly and legally implemented, planners safeguard legacies and ensure that wealth is preserved and protected across multiple generations—indeed protecting families of wealth from themselves—addressing the complexities of preserving wealth and family harmony amid extreme affluence and intergenerational dynamics.
HBO’s hit series Succession offers a compelling lens into what can go wrong when these complexities and challenges go unaddressed and highlights the critical need for strategic trust planning, modern trust laws, and effective family governance among ultra-high-net-worth families.
The Roy Family: A Cautionary Tale
Reportedly inspired in part by the life of media mogul Rupert Murdoch, Succession provides a dramatized but cautionary illustration of the pitfalls families with substantial wealth often face—and why protecting the next generation from themselves is critical. The fictional Roy family, led by patriarch and first-generation wealth creator Logan Roy, built a global media empire worth billions. Yet their story is one of dysfunction, characterized by power and control struggles, wealth preservation and asset protection challenges, and personal crises, particularly among the second generation of siblings.
While the show’s drama is exaggerated for entertainment, the challenges depicted are sadly all too real for ultra-high-net-worth families, with issues often rooted in:
- Lack of clear and proper trust or succession planning, creating intense rivalry and family conflict among second and subsequent generations.
- Inadequate preparation of the next generation for the responsibility of running a business and handling extreme wealth.
- Absence of clear governance and communication structures.
Safeguarding Wealth and Family Harmony: The Role of Modern Trust Law and Situs Selection
Modern trust laws, particularly in top-tier trust jurisdictions like South Dakota, offer powerful planning tools to address the very challenges that plagued the Roy family. These tools keep control with trusted family advisors and are designed to protect next and subsequent generations from themselves while fostering harmonious family relations and multigenerational wealth preservation. By placing a family-owned business and wealth into a well-settled trust, first-generation wealth creators can:
- Designate specific heirs to inherit wealth and business operations over multiple generations.
- Reduce state and federal tax liabilities.
- Obtain privacy and confidentiality.
- Achieve asset protection.
- Maintain direction and control over trust assets.
- Educate and prepare next and future generations.
All of this can be achieved by leveraging the sophistication of South Dakota’s progressive and cutting-edge trust laws, as they provide innovative and effective solutions for families through:
- Dynasty Trusts: The cornerstone of multigenerational wealth preservation, empowering families to avoid estate taxation and establish enduring legacies.
- Privacy and Confidentiality: How privacy laws like South Dakota’s can shield family wealth from unnecessary disclosure, enabling discretion and reducing conflict.
- Domestic Asset Protection Trusts: Safeguarding family wealth from external threats, lawsuits, and intra-family disputes.
- Directed Trusts: A revolutionary model that unbundles asset management and trust administration functions, ensuring settlors and advisors maintain control over aspects of trust administration and wealth transfer.
- Family Governance: Critical to ensuring that wealth serves as a tool for empowerment rather than a source of division.
- Private Trust Company: A tailored approach for families managing complex assets to preserve wealth, plan for succession, and maintain control over their wealth.
Beyond Succession: Lessons Learned
While Succession is great entertainment, the lessons learned serve as a stark reminder of the perils facing families with extreme wealth. Too often, destructive human tendencies—greed, rivalry, jealousy—are exacerbated by poor planning and a lack of communication, destroying ultra-high-net-worth families and individual family members over generations.
However, next and subsequent generations can be well protected from themselves and avoid disruptive family dysfunction by simply selecting the proper trust jurisdiction, such as South Dakota, engaging powerful modern trust laws, and participating in effective family governance strategies, which will be explored in greater detail through subsequent publications this year. For additional insights on protecting families of wealth from themselves, watch the video below.
If you have any questions or are looking for further information on any of the tools and strategies discussed, please reach out to us via our contact form or call us at (605) 224-9189.
