Inheritance battles among Israel’s wealthiest families, and how they could have been avoided
Israel’s family-owned businesses, which account for 90% of small and medium-sized enterprises and 40% of large businesses, are facing a crisis. The founding generation built the business, but what happens when control passes to the next generation — and later to the grandchildren? Without careful succession planning, disputes can destroy both businesses and wealth.
The problem is particularly acute in Israel, where the culture of ‘start from scratch’ and the lack of long-term planning often leads to disorderly succession. The result is a high failure rate for family businesses, with 70% losing their wealth by the second generation and 90% by the third.
One study on the subject, conducted by the Williams Group, followed 3,200 wealthy families over 20 years and found that the problems did not stem from failures in taxation, governance or preservation, but from the collapse of trust and communication within the family unit and from heirs who had not been prepared for financial responsibility.
The Vanderbilt family, which built a railroad empire worth $100 million in 1877 — the equivalent of billions today — lost its entire fortune in less than a century. At a 1973 family reunion attended by 120 descendants from the third generation onward, not a single millionaire remained.
The key to avoiding these pitfalls is to plan for succession during the founder’s lifetime. This involves creating a structured family wealth plan that transfers property, assets, rights, businesses and other interests to descendants in a thoughtful and efficient manner, fulfilling the owner’s objectives legally while minimizing taxes and other costs and, ideally, preventing legal disputes and family conflict.
However, many wealthy people admit that they disclosed little or nothing about their finances to their children, who then reach the inheritance stage unprepared, without knowledge, values or a sense of responsibility. This lack of communication and reluctance to discuss wealth is a major cause of the problems faced by family businesses.
One example of a successful succession plan is the Strauss family, now worth more than 13 billion shekels. The family’s small dairy farm, established exactly 90 years ago, was passed on to the next generation through careful planning and intergenerational cooperation. The family’s success can be attributed to their ability to set aside ego and focus on the long-term preservation of the family unit.
In contrast, there are examples of unequal succession that created problems in the second generation and, from there, in the third. The Wertheim family, for instance, transferred the family assets, estimated at billions of shekels, to their two children, Dudi and Drorit, during their father’s lifetime, leading to serious conflict between the siblings after his death.
The solution is to involve all stakeholders and maintain fairness, and to avoid dramatic steps in a will that is only opened after the founder’s death. Families should consider who may eventually work in the business and agree on rules for transferring ownership to future generations. This requires advance planning and a willingness to set aside ego and focus on the long-term preservation of the family unit.
In conclusion, the key to avoiding inheritance battles among Israel’s wealthiest families is to plan for succession during the founder’s lifetime. This involves creating a structured family wealth plan that transfers property, assets, rights, businesses and other interests to descendants in a thoughtful and efficient manner, fulfilling the owner’s objectives legally while minimizing taxes and other costs and, ideally, preventing legal disputes and family conflict.
