There is an old adage, irrespective of the wealth a family has built up, they will still go “from shirtsleeves to shirtsleeves in three generations”. Despite the best intentions of the first-generation creators of wealth, many families have seen their assets – and living standards – fall quite dramatically as a result of common money management mistakes.

There are numerous risks that could ruin your chances of keeping as much money within your family as possible. Some obvious, like hefty Inheritance Tax bills as a result of not maintaining a well-considered, up-to-date Will or not taking proper estate planning and succession advice. However, divorce or family disputes over shared business interests are more dramatic and more common than you might think. Both are significant destroyers of wealth – as many families sadly know to their cost.

Having an appropriate Will is the fundamental building block of succession planning and wealth preservation. It is remarkable how many fall at this first hurdle. Your Will should be reviewed at the same time as any significant life event (e.g. marriage, divorce, or the birth of children and grandchildren) and every few years in any event.

Passing the family business down generations is notoriously difficult. Anecdotally, there is a 30% chance of a family business successfully passing from generation one to generation two, and only a 10% chance of the family business surviving the transition to generation three.

At generation one, the family business is relatively straightforward. Ownership and management of the company is usually found in one person who has all the control and power. By the second generation the business may be diluted between siblings with different interests of different family members, some owners and managers, others may simply be owners.

When you reach the third generation, there is usually an even greater separation of interests. As interests and roles separate, tensions and risks to the preservation of the family wealth grow ever greater. A distinction should always be made between: ownership of the business, management of the business and personal family affairs.

Failing to separate out these three areas when considering succession planning and wealth preservation often leads to a breakdown in the family and its business.