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Statut Investisseur privé (pour topic ralentir pour gérer ses actifs)
The inherited future
A virtuous and ethical act intended to establish the future and preserve the memory of the past, succession ensures the continuation of a lineage and sometimes the survival of a business. Nevertheless, aside from its social and symbolic value, inheritance can become a burden if planning begins too late, especially in a climate of recurring crises. New approaches are considering inheritance through the prism of the ‘afterlife’.
Youth is certain what it rejects before it knows what it will accept. Jean Cocteau
A look ahead to major trends for the years to come and their impact on the financial and economic sector. Prepared by Lonsdale’s strategic planning division, with the participation of Philippe Depoorter, Family Practice Leader at Banque de Luxembourg.
Succession is embedded in civilisation. The word comes from the Latin successio, meaning ‘following after or coming into another’s place’. Thus, it expresses how wealth or culture passes through time and generations. The scientific community agrees that the essential difference between humans and the other intelligent species populating our planet lies not in their cognitive capacity, but in their memory. For example, the octopus is extraordinarily intelligent and spends its life learning and registering new information but does not pass it on when it dies, condemning every new generation to start again from scratch. As Nietzsche put it, “The future belongs to those with the longest memory”1 who should be “the heir of all nobility, of all past intellect, and the obligatory heir.”2
Central to society, succession is an expression of the very human ability to look beyond one’s own death. According to German philosopher Peter Sloterdijk, it is “what allows children to pass from the world of ancestors into the world of descendants.”3 Succession preserves the future of a bloodline, a business or a brand. The biological relationship is combined with a personal kinship that nurtures identification and mutual recognition within the family. Rather than a passive act of receiving, inheriting is seen as a responsibility to fulfil a plan that was sketched out by earlier generations. For Martin Heidegger, another German philosopher, inheritance is to be found in posterity: “The mission of heirs is to give concrete form to what has been merely outlined.”4
Often a sensitive and unpopular topic, succession has been examined extensively from a philosophical viewpoint, despite its economic character. Yet it permeates economic life and supports the takeover and revival of businesses. Bridging the gap between financial and symbolic considerations, succession gives capital an altruistic function. However, it can also be a heavy load to carry. As the economy and purchasing power are assailed by crisis after crisis, is it still possible to inherit with an easy mind? Is passing on the company within the family still an inevitable course of action? Moreover, what future roles could banks play in facilitating this deeply personal milestone?
Disruptions in succession
New social and demographic forces are taking their toll on succession. Longer life expectancy, changes in family structure and complex tax situations are placing families under pressure. Above all, the handover itself is being postponed, as are the essential conversations that should precede it. In 2020, the average age of inheritance is 54, compared with 42 in 1984.5 Consequently, inheritances are larger but exacerbate social inequalities and the differences in wealth between the old and the young, who receive their estate later and later. Asset stocking continues to grow, with the potential to make upcoming generations the richest heirs to date – or the poorest.
As life expectancy increases, the subject of inheritance is avoided by parents who are investing in their own happiness or retaining control of their business. This may lead their descendants to stray from the path set out for them and reject the family capital. Furthermore, INSEE (France’s National Institute of Statistics and Economic Studies) has shown that the probability of taking over a business is higher if the beneficiary receives a gift rather than an inheritance,6 highlighting the causal effect of preparation. As Philippe Depoorter, Family Practice Leader at Banque de Luxembourg, explains: “Succession is something that people prefer to postpone until later... and that they also want settled quickly. However, there is no quick fix for succession. We need to understand what is to be handed over, and how.”
Other social configurations, such as family structures, also influence the success of the handover. Large families bound by marriage contracts tend to show more foresight than single people do. Individualism and an expected ‘singlehood boom’ in the coming years carry the risk of further delayed and, without the preparation of a will, even enforced successions. These changes mean that the traditional image of the untroubled heir to a fortune has changed to one of an heir who is worried about debt.
There is no quick fix for succession. We need to understand what is to be handed over, and how.Philippe Depoorter, Family Practice Leader
A family affair
The main reason why families struggle to broach the subject in time is that inheritance can be an extremely touchy subject. The archetypal image of the family meal that ends in chaos and the risk of conflicts between beneficiaries help to make inheritance a taboo within families. Its sacred, untouchable nature can even make it a ‘forbidden’ discussion.7 The myriad tensions involved were laid bare in France in 2019, when the singer Johnny Hallyday tried to disinherit his two elder children, triggering outrage from a section of the public.8 Likewise, it seems impossible for an heir to refuse a parent’s heritage without ‘denying his legacy’ and becoming an outcast. Anne Goedert, Family Practice Adviser at Banque de Luxembourg, confirms: “Children and grandchildren can be anxious about inheriting. We invite them to talk about it with the generation in control, to protect not just the continuity of the legacy, but also family harmony.”
As well as economic issues, succession raises moral questions that challenge our perception of bereavement. Psychiatrist Alain Sauteraud8 explains that our western societies are “built on the myth of immortality” and on faith in statistics as guarantees. As a result, if life expectancy is estimated at 81 years, parents will not broach the subject of succession until they are around 50. Taboos, denial and the illusion of control are all obstructions to dialogue.
If families have trouble envisaging the ‘afterlife’ in terms of their legacy, it can be even more difficult when passing on a business. A string of 21st-century economic crises and the ‘lockdown’ have caused many business handovers and retirements to be postponed or cancelled in the hope of rebuilding stability for those taking over the reins. The COVID-19 crisis has been likened to a ‘black swan’ 10 event,9 a highly improbable critical breakdown which raises multiple challenges and hinders entrepreneurship. Faced with uncertainty, descendants may reconsider their decision to take over the business and feel that they are not up to the task. Anne Goedert agrees: “It is sometimes difficult for those taking over to find their legitimate status, their place in the business, their management style. That’s why support is vital before and after the handover.” Exceptional circumstances and poor economic health at a national level place extra strain on discussions about inheritance, even making it a factor in inequality.
Indeed succession tends to sustain ‘chains of imitation’ where wealth and economic power mainly stay in the same families for generations.10 Inheritance has been a long-standing topic of international debate among economists, some of whom believe that succession is the answer to the challenge of continuity in society but that wealth should also be passed on to the wider community.11 Discussions about inequality of opportunity can be traced back to the progressive theories of the 19th century. Economist Thomas Piketty champions the concept of an inheritance for everyone12 and promotes the idea of inheriting at the age of 25 to allow young people to access their estate earlier. The role of succession is also examined in liberal theses, which accuse inheritance of creating greed and discouraging entrepreneurship. The Carnegie effect, for example, claims that inherited wealth increases leisure consumption but harms recipients’ work efforts. By contrast, a timely gift would promote innovation and the birth of new, stable businesses. This is why some Silicon Valley CEOs, such as Mark Zuckerberg, have decided not to leave their fortune to their children but instead donate it to charities that promote employment opportunities.
Our western societies are “built on the myth of immortality”.Alain Sauteraud
Based on the salient points presented above, which clarify the role and symbolism of succession, we can introduce the role of banks and the programmes they are implementing – programmes that are valid today and that can be further developed to meet the changing needs of society and families. In the two scenarios below, we place banks at the forefront of inheritance, providing not only advice but also mediation and empathy. While the scenarios are grounded in real, tangible and contemporary factors, they suggest new directions for the future.
Scenario 1: the peacekeepers of inheritance
The unpopularity of inheritance as a topic may well be linked to a lack of understanding and preparation.
When banks and notaries address the question with families, they are stepping into the household’s private world and often encounter family taboos and psychological barriers. Banks are therefore introducing relationship services, which makes them perfect family facilitators. Continuing in this line, in years to come, banks could go even further in intervening in family conflicts and helping younger generations to express their emotions to their parents. Round tables and breakout sessions would be held regularly to enable all family members to speak freely and forestall anxieties. In an increasingly fast-moving and inhuman world, banks would represent a haven of empathy, with family-oriented discussion groups inspired by 18th century ‘salon’ gatherings. Each member of the family would have a turn to express themselves freely without being interrupted or judged.
Fully aware that inheritance can be a very personal matter and that some people may be reticent about discussing their motives, banks would offer a messaging service in a similar vein to old-fashioned answering machines. Family members would speak freely, as in a confessional. Banking advisers would listen and respond to each message with the most relevant information, adding a psychological aspect to their consultancy skills. With all the information readily at hand, families would be more educated, wiser and better prepared for succession. Rather than passively accepting a succession under conditions that are ‘sealed’ by their parents, children and beneficiaries could take the initiative in discussions, perhaps even expediting gifts within the parents’ lifetime or alleviating the acceptance of refusal. With better preparation and easier, more open discussions facilitated by a ‘peacekeeping’ bank, succession would be transformed from an ‘unmentionable’ topic to a straightforward computer operation. Once this has been done, parents could concentrate on essential matters: the values and cultural and emotional legacy they want to pass on.
Scenario 2: licence to inherit
The virtual world is real. Over the years, gaming platforms and virtual reality (VR) will strengthen their hold on everyday life, converging with reality and even replacing it. The democratisation of immersive technologies will allow banks to assist with questions about taking over a business. When they make an appointment with their adviser, future business leaders will be offered a gaming experience: a virtual game allowing them to project themselves into their future life. With a VR headset and a set of customisable options, the game will help beneficiaries to gain a better understanding of the situations they will face. When they encounter a dilemma, an algorithm will calculate the best options and probabilities for them. This ‘merit-based’ system will also enable the transferor to ensure that their successor is the best candidate for taking over the business. The experience could also lead to a qualification or a licence, certifying that the transferee has the necessary qualities and motivation. This could be used to support planning for inheritance or gifts.
With discussion and a broader perspective, the symbolic load of succession would be lightened. As a result of the ‘automated’ process, children would no longer feel obliged to take over the family business. Instead, every family member would be supported in making the best, most informed decision.
Both scenarios predict the increasing importance of banks in these sensitive and sometimes difficult life stages. Rather than being mere financial agents, banking advisers assume the role of professional facilitators. Their efforts are focused on enabling free speech, dismantling taboos, and also on forward planning to simplify the paths to succession. In a third scenario, we could have imagined artificial intelligence becoming so advanced that the wishes of deceased parents would continue to be expressed using voices or holographic images, supporting beneficiaries in their new lives. After all, succession is a way of making a mark on history and getting closer to immortality...
The combined effects of economic crises and new demographic factors (longer life expectancy, boom in singlehood, etc.) are delaying discussions about inheritance and making it difficult to plan.
While succession is still a ‘forbidden’ topic in many families, raising delicate and highly personal issues, banks are taking on the role of facilitators to encourage free speech using game techniques and discussion groups.
As life expectancy increases, beneficiaries are inheriting later and later, and accumulating a stock of assets that do not help them to enter employment. Gifts from living parents and good preparation for inheritance encourage a desire for entrepreneurship and a spirit of innovation.
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1 Nietzche, The Gay Science, Flammarion, 1997 (reprint).
3 Peter Sloterdijk, Après Nous le Déluge, Payot Rivages, 2014.
4 Jean-Piere Paturet, Qu’est-ce qu’un Héritage ?, Revue Empan, Cairn, 2007.
5 INSEE, 2020.
6 Luc Arrondel, Bertrand Garbinti, André Masson, Inégalités de Patrimoine entre Générations, INSEE report, 2014.
7 Impôts: l’Héritage, un Sujet Tabou en France, Le Monde, 2020.
8 Alain Sauteraud, Pourquoi la Mort est Si Tabou, study by PFG in partnership with Psychologies, 2019.
9 Valery Michaux, Comment les Entreprises Peuvent-elles se Projeter dans le Futur ?, La Tribune, 2020.
10 Faut-il Supprimer l’Héritage ?, Le Monde (video), YouTube, 2020.
11 Jeremy Bentham, An Introduction to the Principles of Morals and Legislations, Gallica, originally published in 1780.
12 Thomas Piketty, Capital et Idéologie, Seuil, 2019.