As the landscape around issues such as Inheritance Tax, Business Relief and even certain share classes continues to shift, the challenge of passing on wealth is becoming more pressing than ever. It’s a challenge that many families remain reluctant to confront.
It’s important to talk about these matters at the earliest opportunity. Families who adopt such an approach are far less likely to end up stressed, confused and even in dispute.
The Switchpoint team
Such hesitancy is in some ways understandable. This is an issue that encompasses mortality, fairness, expectations and the complexities of family dynamics – all potentially awkward topics of discussion.
The result is often that the necessary conversation begins only when circumstances force it to take place. This is usually the worst possible time – and it might even be too late.
In our experience, it’s important to talk about these matters at the earliest opportunity – and to do so as candidly as possible. Families who adopt such an approach are far less likely to end up stressed, confused and even in dispute.
A conversation is as important as a will
We all know a well-drafted will and a sensible structure for passing on assets are vital. Yet documents alone can’t explain the thinking that shapes potentially life-changing decisions.
For example, why might one child receive help with a house deposit now while another has to wait before benefiting? Why has the future of a family business been mapped out in a particular way? Why have significant funds been set aside for philanthropic purposes?
The reasoning behind such choices needs to be shared at a time when everyone involved can still ask questions, rationalise the process and come to terms with what lies ahead. Simply put: passing on wealth demands openness and understanding.
Each family’s situation is unique, of course, so there’s no perfect script. But there are several key principles that can be applied in almost every case:
- Choose the right setting. A relaxed family gathering is often better than a formal meeting. However, it’s prudent to avoid anniversaries, holidays or other times that might give rise to strong emotions.
- Start with values rather than numbers. Focus on what you want your wealth to achieve – independence, security, education, impacts in the wider community – before you discuss amounts.
- Let everyone have their say. Your beneficiaries may have their own plans, worries or wishes, some of which you might not be aware of. Encourage them to speak up – and listen carefully.
- Be patient. One conversation will seldom cover everything, so be prepared to proceed in stages. Raising the subject in the first place is what matters above all.
- Leverage expert help. This is a classic example of the crucial inflection points that shape wealth across generations. Expert guidance can play a major role in ensuring the desired outcomes are achieved.
Lifetime giving
More families are passing on wealth to later generations while still around to see the benefits. This might include contributing to a first home, funding education or helping build grandchildren’s savings.
Lifetime giving can also form part of a wider estate plan. The rules around gifts are detailed, and the right approach depends on individual circumstances. It’s important to take advice before making significant transfers.
It’s equally important to make sure you retain sufficient wealth to safeguard your own security. Generosity should never come at the expense of your own peace of mind.
Family businesses
Family businesses bring their own complications. Not every member of later generations will want to be involved, and treating children or grandchildren equally doesn’t always mean treating them identically.
These are challenges that are best addressed well ahead of any change in ownership. We discuss them in more detail in our article on selling a business, which you can read here.
Keeping a plan up to date
Of course, it’s also essential to acknowledge that families change. Marriages, divorces, births and deaths all affect who should benefit and how.
As we’ve all seen in recent years, tax rules can also go through a shake-up or two. As policymakers continue to move the goalposts, a plan that made perfect sense 10 years ago might no longer reflect your wishes or represent the most efficient approach.
We recommend reviewing wills and estate plans every few years, as well as in light of any major life event. It’s also worth checking that pension nominations and life insurance arrangements – which often sit outside a will – are still aligned with your intentions, particularly as most unused pension funds will fall within your estate for Inheritance Tax purposes from 6 April 2027.
Finally, don’t forget that retirement is inextricably linked with all these considerations. We cover this topic in more detail in our article on framing retirement as a transition, which you can read here.
This article is for general information only and does not constitute financial advice. The value of investments can fall as well as rise, and you may get back less than you invested. Please speak with an adviser before making any financial decisions.
Switchpoint Wealth Management Limited is authorised and regulated by the Financial Conduct Authority; Firm Reference Number 1059781
