Are you prepared for the “great wealth transfer”? 3 essential family conversations you need to have
An estimated £7 trillion is expected to be transferred between the generations over the next 30 years. And yet, the number of people who haven’t considered how best to protect their family wealth is startling.
A report from FTAdviser suggests that in 2022, only 12% of UK adults had spoken with a financial planner about how to maximise their wealth transfer plans. And more than half haven’t even written a will.
Now is a great time to consider your own “great wealth transfer”
Over recent decades, rising levels of household wealth in the UK mean that you may have accumulated greater amounts of money, property, and other assets to leave to younger generations.
This mass migration of assets, dubbed the “great wealth transfer”, means it’s more important than ever that younger generations are prepared to manage large sums of money they might one day inherit.
If you don’t have a structured plan for transferring wealth, there’s greater chance of creating unnecessary risks and missing opportunities to maximise the amount of money you are able to pass on before it’s eroded by Inheritance Tax (IHT).
Over the next few months, we’ll cover everything you need to consider, ensuring you have a cohesive estate plan to help you leave as much of your wealth as possible to your loved ones.
First though, it’s time to talk.
3 conversation to broach sooner rather than later
1. Share important information early
Hopefully, you’ve already written your will. If you’re very organised – and have taken our advice – you may also have an ICE (in case of emergency) file ready. This can make it easier for your family to manage all the necessary admin, on death or if you become unable to take care of things yourself.
If you don’t already have an ICE file, now would be a good time to start organising one. Get in touch and we can help you understand the key elements you’ll need to gather together in one secure location.
Tell close family members and your executor where they can find your will and ICE folder, and share any passwords they may need to access the information when the time comes.
You may decide to disclose some details of what your will contains, too. This may be especially important if you’ve made difficult decisions that may surprise your beneficiaries. And it could help to avoid delays in probate if someone disputes your will.
2. Set expectations for your children and grandchildren
According to Canada Life, 56% of UK adults who received an inheritance in the last five years hadn’t discussed how much they would be getting with their benefactor beforehand.
One-third of participants receiving an inheritance said they have or intend to save the money. Others said they would:
- Invest for the future (19%)
- Pay off debts (15%)
- Renovate a property (14%)
- Travel (12%)
- Gift the money to children or grandchildren (12%).
While you may not wish to share precise details, talking to your beneficiaries about how much they may expect to inherit could help them to plan ahead.
3. Discuss your wishes, and ask how you could best help others
If you intend to spend or gift money to family during your lifetime to mitigate the eroding effects of IHT on your estate, talk to your family about how you could best share your wealth.
For example, if your grown up children are independent and making their own success in life, instead of financial gifts, they may prefer you to spend your money on creating lasting memories.
Indeed, last summer Forbes described an explosion of multigeneration travel – where grandparents or parents organise and pay for holidays for the whole family.
Depending on circumstances, this could be a wonderful way to spend quality time with close family and loved ones, and leave lasting memories you could all cherish.
Alternatively, perhaps you could help towards the cost of education for your grandchildren, or put some money in trust to give them a hand onto the property ladder when the time comes.
Think about what might be most suitable for your family, and then have an open conversation about all the potential options.
If you and your family have opposing goals, dreams, and ideals about your money, it could make it harder to create a suitable plan for transferring your wealth in the most efficient and beneficial way.
We can mediate key conversations between you and your family, allowing you opportunity to ensure you’re on the same page and help you create a positive vision for the future.
Top tips for having a constructive financial conversation
Talking about money can be uncomfortable. So, here are four quick tips to help make the conversation easier:
- Be prepared – before you begin, understand what you want to discuss and the outcome you hope to achieve. Consider reviewing your current arrangements beforehand so you are prepared with all the facts and figures you may need to hand.
- Time it right – find time to talk to your family at a time that suits them. This can help ensure that you’re able to discuss everything without interruptions. You should also allow plenty of time to make sure you don’t feel rushed. Ideally, you should have time to cover everything you hoped, and answer any questions that may come up as you talk.
- Think about how to start – money talk isn’t always straightforward, and often starting off on the right foot can be all you need to achieve your aim. So, before you blurt it all out, take a beat and work out how to begin.
- Don’t be afraid to hit pause – money can be an emotive topic. If emotions begin to run high, you might want to consider pausing the conversation. Allow your family time to calm down and digest the information you’ve shared so far. Rome wasn’t built in a day, and you can always set a date to pick the conversation back up at another time.
Invite your adult children to your next financial planning meeting
As you begin to plan how you’ll pass on your wealth, this is a great time to bring family members and other beneficiaries into conversations with your financial planner.
We can start to offer help and advice to family members, and begin asking questions such as whether you think your children will be able to cope with this amount of money. And if not, what could we do to help them.
If someone isn’t used to dealing with large amounts of money, a sudden windfall can be daunting. Having a trusted financial planner on hand to help establish a sound financial plan based around your beneficiaries’ own set of circumstances and life goals, could make a big difference to them now, and over the long-term future.
Get in touch
Many people feel uncomfortable talking with their family about passing on their legacy, but leaving things until the last minute could mean it’s too late to make a difference.
At Logic, we aim to help you pass on as much of your wealth as possible. If you’re concerned about how to protect your legacy and want to learn more about how we can help ensure your family wealth passes safely to the next generation, please get in touch.
Email at info@logicfinancialservices.co.uk or check with your adviser.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning or will writing.
