"Silence is the most expensive succession strategy"

Dietmar Arzner, around EUR 400 billion is inherited or gifted in Germany every year. Why do families still find it so difficult to address it?

Because confronting your own mortality is uncomfortable. So people put it off

And what happens as a result?

Silence creates uncertainty. And uncertainty leads to assumptions that later turn out to be wrong.

Can you give us an example?

A tourism entrepreneur had assumed for years that his children were not interested in the business. In fact, his daughter had long been preparing for a leadership role. When she learnt of his plans to sell, she was shocked. A single open conversation several years earlier could have prevented the misunderstanding.

You often emphasise that time is of the essence. Why the urgency?

The case of Heinz Hermann Thiele, the principal shareholder of Vossloh and Knorr-Bremse, is a good example. Thiele had thoroughly planned his succession - but not for the possibility of his sudden death. When he died in 2021, there were no clear provisions for precisely that scenario. Legal disputes followed, and his heirs paid billions in inheritance tax.

What can other families learn from this?

Succession always requires a dual-track approach: a planned transition process spanning several years, alongside contingency planning for death, an accident or incapacity. Focusing on only the first track leaves you without a safety net.

Dietmar Arzner

Dietmar Arzner is Business Area Head and Co-Head of Wealth Planning & Strategic Solutions at LGT Bank in Liechtenstein. The full article has been published as issue 46 of the Kirsten Baus Institute for Family Strategy’s series of publications. You can find out more here.

Many of your client families have international ties. How does that change matters?

It makes everything more complex. Children study abroad, the family firm operates on several continents, and the wealth is spread across the globe. Suddenly, multiple tax systems come into play.

For example?

A change of residence or a cross-border transfer of shares may be treated as a taxable exit. This can trigger tax on unrealised gains even though no cash has been received. We call these "dry tax charges". Families need to understand these pitfalls before you fall into them.

Is there a model for successful succession?

The Princely Family of Liechtenstein. What is less widely known is that the family’s portfolio has included businesses for centuries - originally agricultural enterprises and today also LGT, the financial institution. The family put formal structures in place early on. Those structures continue to serve the family today, in its 26th generation.

What specific lessons can be learnt from this?

Above all, that clear governance pays off over generations. We work with four dimensions. Corporate governance defines the family’s role in the company. Ownership governance governs the ownership structure. Wealth governance covers the organisation of the family’s overall wealth. And family governance - through a family council, for example - provides a framework for the family’s communication and values.

Why is this separation important?

Because it draws a line between business and personal matters. And that is precisely what provides protection: it is not a substantive disagreement that puts a company at risk, but a destructive personal conflict. At the same time, these different areas of governance within an entrepreneurial family need to be approached across disciplines and as an interconnected whole, rather than in isolation.

Selling the family business is often considered taboo. What is your experience?

It is one of the most emotionally difficult decisions a family can face. The ties with employees and business partners are very real.

What matters most in this situation?

A successful sale is about more than achieving the highest price; it also needs to respect the family’s values. Practically speaking, a clear and swift sale for a one-off payment is often preferable to complex earn-out models. This protects confidentiality and simplifies the tax treatment.

What happens to the existing structures following a family business sale?

They often remain valuable. For example, a holding company can be converted into a family office that combines wealth management, governance and philanthropy - and becomes the family’s new anchor following the cash-out.

For the "Wealth for Impact" study, you interviewed more than 60 representatives of the next generation. What surprised you?

How holistically the next generation thinks. One German interviewee made the conscious decision not to join the family business and instead established his own sustainable investment company. His aim was to actively use wealth to create a positive impact on society.

And what gave you pause for thought?

Around three quarters of respondents said they had never been taught how to manage wealth. This is a clear call to action for the older generation.

Is there a positive example?

The Swarovski family. Over several generations, the family consciously worked together to further develop the company, including through sustainable supply chains and renewable energy. This was possible because the older generation was willing to make room rather than hold on to control.

Finally, what advice would you give entrepreneurial families?

Start early. Put everything on the table, including the uncomfortable scenarios. And talk to one another - not only about figures, but about expectations and values too. A lack of communication leads to conflict more often than differing values do. Recognising this can turn an obstacle course into a path families can shape for themselves.