13 June 2022
- Just 1 per cent of people have discussed estate planning with a financial planner
- 58 per cent find inheritance conversations uncomfortable
If there were ever two subjects guaranteed to kill the conversation at a family gathering, it’s money and death. But when is the right time to have the often-dreaded inheritance discussion? The barriers to such conversations vary but tend to revolve around longstanding beliefs that death and finances are inappropriate subjects for the dinner table, as well as parents’ fear of losing control over their financial autonomy.
Parents are not the only ones who are uncomfortable. Adult children may be nervous about raising the topic of their parents’ finances in fear that they may appear greedy, intrusive, or insensitive. Families’ silence on these topics can lead to problems, not least of which is the potential for serious conflicts among adult children after their parents die.
According to research from wealth manager Brewin Dolphin, 58 per cent of those asked admitted that they found the subject uncomfortable, and nearly a fifth (18 per cent) said they shy away from it because they don’t believe they have enough assets to consider estate planning worthwhile. Worryingly, only two percent say they have discussed it with a solicitor and just one percent have done so with a financial adviser.
Carla Morris, financial planner at wealth manager Brewin Dolphin says: “Open communication is an extremely important way of avoiding conflict. An honest series of conversations could help your loved ones understand why you have made these decisions and could help to avoid arguments further down the line. Having an adviser in the room may enable a smoother discussion and ensure any technicalities are clearly explained to avoid any ambiguity.”
So, where is the best place to start?
Keep paperwork up to date
“An incorrect or out of date will can scupper plans completely,” Carla says. A person who dies without a will is known as ‘dying intestate’. This can make sorting out their estate very complicated because the law decides who inherits the estate according to certain criteria called ‘intestacy rules’, rather than following the owner of the estate’s wishes. If it’s not clear what assets the deceased had, or there are complex family relationships, this can make distributing the estate extremely difficult and a costly, lengthy affair with solicitors.
Have the conversation sooner, rather than later
Carla continues: “If you or your family members are reluctant to touch the subject at all, it’s best to approach it in a transparent but compassionate way. Ensuring all parties are clear on what their family’s wishes are in terms of the estate, as well as a broad understanding of what is most important to them and how everyone can be supported. Leaving this conversation until someone is ill or it’s too late can cause huge amounts of stress and will not allow you the clarity of foresight and expectation management for all involved”.
Cater for right now
With rising life expectancies, high care costs and end-of-life expenses, it is crucial to incorporate the potential for these into your estate planning. If you’ve given all your assets away and subsequently incur these unaccounted-for costs, the burden may then be on your children or benefactors to cover them.
Be open about your finances
If it is your estate that is being discussed, there are some additional factors that may make the prospect of having the conversation less appetising. For example, a child who has previously shown irresponsible financial habits, who may fritter away your legacy or become lazy and unmotivated as soon as they inherit. Or an incapacitated child that may not be capable of making informed decisions for themselves. A common source of grievances could be if one child is a much higher earner than the other and receives less inheritance.
Carla says: “The hardest part of communicating your plans is simply starting the conversation. A useful place to begin is by writing down your values and sharing these thoughts with your children. Go through your own experience with money and the factors that led to your wealth, such as disciplined spending and investment decisions. Discussing where the money came from can help your successors understand that their wealth and assets did not just happen by chance, and that they are being entrusted with an opportunity and should manage it responsibly”.
Be transparent about your wishes
She continues: “If one child is likely to inherit more than the others, it is imperative you discuss this early on. Often, family discord arises when children discover they will be receiving unequal shares after one’s passing, generally this can be avoided by communicating beforehand. You may want to invite a financial adviser to your family meeting to give you and your parents an impartial viewpoint and make sure everyone knows where they stand, and that relationships are not unnecessarily strained”.
Consider gifting now if you can afford it
Many people wait until death before passing on their wealth. However, it could prove more tax efficient and personally rewarding to gift money whilst you are still alive. Carla continues: “A financial adviser can also suggest where there may even be opportunities to transfer some assets before death. Discussing your estate plans before it is too late is crucial in making sure your wishes are met, and by planning now, you can ensure your assets are taken care of and will end up where you want them.”
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd.
PRESS INFORMATION
For further information, please contact:
Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: +44 (0) 20 3201 3026
Chloe McFarlane: chloe.mcfarlane@brewin.co.uk / Tel: +44 020 3201 3490
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
NOTES TO EDITORS
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £56.3* billion in total funds, we offer award-winning, personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £49.4* billion on a discretionary basis.
Our intermediary business manages £18.3* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service, the MI Brewin Dolphin Voyager fund range and Sustainable MPS.
In line with the premium we place on personal relationships, we’ve built a network of 33 offices across the UK, Jersey and Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
For more information on the recommended cash acquisition of Brewin Dolphin by RBC Wealth Management announced on 31 March 2022, visit: https://www.brewin.co.uk/group/investor-relations
*as at 31st March 2022.
Brewin Dolphin is authorised and regulated by the FCA (Financial Services Register reference number 124444)