Bringing back the trust: inter-generational misunderstanding and how to prevent it affecting inheritance planning


Articles and media discussions about inter-generational wealth transfer and succession planning tend to focus on ultra-wealthy international families.  Different cultural approaches to family relations and conversations about death are often highlighted as barriers to communication on these topics, and family governance structures suggested as a potential solution.

However, research quoted in International Adviser's article below highlights that many of the same issues that prevent international business founders from addressing their succession planning, also cause similar issues for families in the UK, whether ultra wealthy or not.

A general disinclination to bring up uncomfortable topics such as succession planning and inheritance - at least partly in an attempt to avoid the twin taboos of money and death - mean that opportunities for communication among families are being missed, with potentially adverse consequences.

Concerns about passing on wealth during lifetime are understandable where this affects the standard of living of the parent, particularly given the current economic turbulence in the UK and elsewhere.  

Equally, a desire to do something other than leave an inheritance to family may make discussions about succession seem hard or redundant, whether this results from a wish to enjoy the rest of one's life or to save the planet like the billionaire founder of Patagonia. Yvon Chouinard recently gave the company to a trust and non-profit structure designed to achieve this purpose.  Whatever the reason, it remains important to tell your family if you are not going to leave them an inheritance so they can take this into account when planning their future.   

If concerns about transferring money to younger generations, (whether during life or afterwards) are caused  by a lack of trust in their ability to manage it wisely, or by a lack of understanding around inheritance planning and tax, this is both a shame and avoidable. 

The role of advisers, whether lawyers, accountants, financial advisers or otherwise, is to find a way to bring different generations within a family together to discuss their aims and attitudes to wealth, and their views on investment and charitable giving in order to break down inter-generational barriers.  In doing so, parents may start to see their children as independent adults with their own interests and concerns. When adult children see that their parents are listening to them rather than judging them or treating them as the babies they used to be, communication and understanding improve and parents begin to trust that their children will manage their wealth wisely and even for society's benefit.  

While formal family governance structuring may be appropriate only for the very wealthy and those with significant family businesses to pass on, other aspects of succession planning are relevant at all wealth levels.  The ability to be seen as a trusted adviser to all members of the family, and possibly to mediate potentially heated discussions, can help all sides of the family express their views where previously they may have kept them to themselves..  At the same time, advisers can explain the advantages and disadvantages of different types of lifetime and post-death structuring, whether for tax or other reasons, ensuring that parents do not abandon their planning because it all seems to be too complicated.

The hard part is starting these discussions and to do that, advisers should raise these issues whenever they can.  When a client comes to see their adviser, whether about selling their company, reviewing their investments, buying a property, or any other matter, that is the time to raise the question of succession planning and the importance of discussing it with their families.  Hopefully, this will help to reduce the number of inheritance battles we see between children who don't understand why their deceased parent has left their estate as they have, or done no estate planning at all.

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"...Transferring money to the next generation is an ambition for many, yet there is a stark lack of any structured planning in evidence. This creates risk and missed opportunities for those on both sides of the wealth transfer."
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