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Transfer of property to children

One the main risks faced by the first generation of business families in Slovakia and the Czech Republic is the transfer of property to their children and the next generations in a manner so as to prevent the property from causing harm to the family and its immediate social circle in the future. This may seem unreasonable, but there are very many families (not only in the Slovak and Czech environment, but also in developed countries) where succession turned out badly.  In many cases, property was the cause of a family break-up, and the family members lost their motivation to develop further. In the end, the assets were there for everyone to benefit from – everyone but those for whom the property was originally intended.

It is a global fact that up to 70% of families face a slump in the value of their wealth when passing it down from the second to the third generation. In other words, as many as two out of three grandchildren of today’s founders will not be able to enjoy the fruits of the efforts of their grandparents. It should be noted that it does not matter whether it is property in millions or hundreds of millions of euro. What is the cause of this situation? Why are these mistakes repeated although they are generally known and explained?

The first cause is insufficient education given to the coming generations regarding the family as such, its individual members and their mutual relationships and the property as such. Another cause is the absence of rules for a healthy development of the relationships and a reasonable use of the family wealth.

In the first place, family property is here to help the family develop and it can assist the family in preserving its internal harmony. The property should contribute to the development of individual personalities within the family. However, it must not be used as a source of support for individual family members. Family wealth may give the family access to an elite education but it must not be used to finance a student’s life for another twenty years. The property may be a means for creating a better holiday experience, but it must not be used to pay for daily shopping.

In our practice, we pursue two main objectives. The first is the preservation of the property in a single, logical whole. At the same time, we assist families in meaningful administration of the property and in retaining absolute control over it. The other objective is helping families define individual rules for the use of the property to avoid any misuse to the detriment of other family members. We assist parents in answering their own questions as to further steps and communicating the steps within the family and to the next generations. We realise that wealth succession is a highly sensitive and mainly unique matter that occurs once in a lifetime. It is wise to be well prepared for this step.

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