By Vittorio Occorsio, notary and full professor of private law at Mercatorum University.

Transferring a family business without destroying it is one of the most difficult challenges an entrepreneur can face. Today, a trust is the most flexible tool for doing so. But one crucial variable must be managed from the outset: the rights of the heirs.

There is a question that almost no Italian entrepreneur can contemplate with peace of mind: what will happen to my company when I am gone?

The Italian Civil Code provides a simple answer: assets are divided among the heirs according to predetermined shares. If there are three children, each receives one-third. If only one works in the company and the others have no interest in managing it, the result is a jointly owned business that nobody wanted and that often fails to function.

This is not an uncommon problem. It is estimated that more than 70% of Italian family businesses do not survive into the second generation. There are many reasons, but one occurs more often than the others: the absence of succession planning.

Inheritance rules were designed to distribute wealth, not to transfer a business. A business is not merely a collection of assets; it is a system that creates value only when it is managed with unity and continuity. Breaking it apart means destroying it in most cases.

To address this need, trusts have in recent years become one of the most widely used tools for transferring Italian family businesses from one generation to the next.

The family agreement, introduced in 2006, allows an entrepreneur to transfer a business or company holdings to one or more descendants while immediately compensating the other heirs entitled to a reserved share. It is effective but rigid: it requires everyone’s consent, does not allow conditions and takes effect immediately. In many family situations, it is not a workable option.