Many first generation retirees report feeling rudderless and without purpose: “Without my business, what is so special about me?” Hughes says the key to maintaining one’s post-retirement identity and esteem is to view succession as “an asset allocation decision, rather than a sacred trust.” By doing so, the business founder can make decisions without as much emotional baggage, and be better able to let go of the business and move on successfully to the next phase of his or her life.

I never wanted my children in my business because they, and everyone else, would be comparing their performance to mine.”

Steve believed he embraced this philosophy, but withdrawing from the business was harder than he expected. Although he did not see his business as part of his family legacy, the loss of the tangible evidence of his drive and his success required a new way of thinking. “I had always looked at the business more as a tool to create a liquidity event,” he says. “I wasn’t so attached to it that I couldn’t sell it.”

Once the business was gone, however, not only did he have to fill his time, but he worried about instilling a work ethic in his children when he did not have a job himself. “It was a huge challenge to find meaning and fulfillment in nonfinancial activities,” he says.

Though Steve says he realized early in his career that he wanted the business to work for him, rather than the other way around, the transition to a life of leisure was difficult. “It was about a year’s transition,” he says, “and I didn’t enjoy it the way I could have because there was some anxiety.”

Saved from Themselves
Now that the twins are young adults and are preparing to enter the work world, his apprehension has shifted to issues of transferring his fortune. “It’s the classic case of, ‘If I give my kids too much money, am I going to ruin them,’ and ‘How much is too much?’ ” Steve has overcome this particular fear by informing his children that he and his wife are bequeathing much of their wealth to a family foundation. His children have been involved in setting up the foundation, and in the decisions about how to allocate the money.

The couple have also introduced their children to budgets—even requiring them to account for their spending each week while they were in college, and for any withdrawals they might wish to make from their modest trust funds. They also required the children to review their trusts and keep up with the investments, and to take a role in vital decisions of the family foundation. Because of this, his daughter, Tina, says she and her brother are prepared to make their own marks in the world. “If I receive an inheritance, I don’t think I’ll live off it,” she says. “I’d like to start my own business, ideally.”

In preparing their children to be financially responsible heirs who would eventually control their own assets and lives, Steve and his wife enabled both generations to avoid some of the successional pitfalls and intergenerational mistrust that befell the Liautauds. In the end, Hughes says, the issues the first generation face center on trust. “The first generation must find a way to trust the second, and allow it to continue the family legacy by being productive and valued by all family members. If the first generation creates a nurturing environment, then a family’s financial capital will continue to grow.”

Illustration by Jonathan Barkat.

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