Intelligent Estate Planning: How To Keep Your Wealth In Your Family, Not In The Tax-Man’s Pocket

Intelligent Estate Planning: How To Keep Your Wealth In Your Family, Not In The Tax-Man’s Pocket

July 29 2019 | Category: Money advice

Wealth is something a lot of people aspire to have these days. Whether that’s through hard work and building it up themselves, or inheriting it from their parents, the paths may vary, but the goal stays the same – build the wealth, and then keep it.

But if you’re inheriting wealth from your family, that second part can be tricky. In fact, studies by the Williams Group Wealth Consultancy have found that 70% of wealthy families lose their wealth entirely by the second generation (the first to inherit it), and 90% of them lose it all by the third.

Digging deeper into the problem, they found that 78% of those wealthy families felt that the next generation were not responsible enough to handle inheritance, and 64% admitted to disclosing little to nothing about their wealth to their children. When asked why they had not talked about it, respondents listed a number of reasons, from being taught not to talk about money at home to worrying that their children will become lazy and entitled, or that the information would leak out and make them vulnerable. And to an extent – they are right. On average, it takes the recipient of an inheritance cheque 19 days to by a new car.

But don’t worry, it’s not all doom and gloom. It is possible to hold on to your hard-earned wealth and make sure it survives for generations to come. It just means you need to be willing to plan now.

Talk Early, And Talk Often

Believe us when we say this – we understand why you might not want to talk about your wealth with your family. There are a lot of reasons you might not think that is a good idea, from fractured family dynamics to teaching your children the value of money and a good work ethic. And when your children are young, this make complete sense.

But when your children are grown up and functional adults in their own right, these reasons might not make much sense anymore. At that stage, being unaware of your wealth does nothing but foster ignorance and make them unprepared for the reality of handling it. So, what we suggest is this talking to your family early, and often, about your wealth. Not just about how much money you have and where, but how you built it, how you want them to use it, and how to handle wealth in general.

And it’s not just children – we see far too many people who haven’t had these conversations with their spouses either. Give your whole family a crash course in financial literacy and help them extend that wealth even further. If you’re not sure how to do that, ask your financial adviser, and they will be able to help you.

Make And Discuss Your Will

Firstly – get yourself a clear, iron-clad will made up by an expert. And second – tell your children about what’s in it.

Many parents decide not to disclose what’s in their will, where everything will go and what they want to be done with their estate. They might do this because they feel uncomfortable, or they don’t want to cause arguments. But transparency is key in ensuring your wealth is preserved.

Siblings will always find out who got what, and by talking through your will with your family, you get the chance to hash out any issues beforehand. It’s better to get this done now, rather than leave it to when you’re not around to explain or make adjustments. Then, it may dissolve into all-out legal war.

Create A Financial Roadmap

Did you know that almost a quarter of baby boomers think that their kids won’t be able to handle wealth properly until the age of 40? And that almost half of wealthy people over 70 agree with them?

Whether you agree with that statement or not, it’s unlikely any child will be happy if you withhold their inheritance until they turn 40, and past the age of 18 age doesn’t factor in much when it comes to passing on an inheritance.

So rather than worry about how they will handle your wealth, do something practical. Provide your family with a financial road map that covers everything from what you want that wealth to achieve, how you want it to be given back to the community and how you want them to grow the wealth further. This way you can provide guidance and ensure your wishes are being followed, and your wealth can endure a bit longer.

Invest In Proper Inheritance And Estate Planning

This is perhaps one of the most important steps, because without good inheritance tax and estate planning, you could end up paying a small fortune to the tax man. Working with inheritance tax and estate planners will help you find ways of preserving your wealth and keeping it in the family (legally of course), and help you work out exactly what goes to who and when.

Minimising the inheritance tax bill is one of the things that separates out the wealth that lasts past generation 2, and the wealth that’s all but spent within a year.

At Chilvester Financial, we have specialists in both inheritance tax planning and estate planning, as well as planning for long term care, pensions and other later-life issues. By embracing these issues now, you can make sure the inheritance you leave goes exactly where you want it to, and not straight into the pockets of the tax man. If you would like to know more about any of our later life services, just get in touch with the team today.