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How do you keep wealth in the family?

Passing on wealth to the next generation is rarely straightforward. Many of today’s younger generation are counting on a larger inheritance to help them out in later life than, in fact, they are likely to receive. Compounding this, numerous research reports suggest that younger generations are simply not saving enough for their futures.

Whatever the size of their inheritance, the irony is that many people will be in their 60’s before they receive a share of their parents’ wealth, well past the age when they probably need it most. This disconnect between generations can be easily resolved if families get around the table to openly talk and educate their children about money much earlier in life. By doing so, not only will expectations between the generations be better managed, but money can be gifted when it’s needed most. At Investec, we can help you plan the best way to tax-efficiently share and retain wealth in your family.

Plan early

Discover how Investec can help you keep your wealth in the family.

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“The thorny question of how to talk to children about the family wealth — and concerns over how they might be affected — is the number one worry for clients, far ahead of concerns about how to invest their portfolio or tax issues”.

Financial Times - How to talk to your children about money, 2018.

Are your children equipped to look after their inheritance? Things to consider.

When do you start the conversation about inheritance?

Can you really influence the financial decisions your children will make in the future?

How do you teach good money management?

When do you start the conversation about inheritance?

Educating the next generation about inheritance and how to manage money can be a key concern for many parents. Yet, despite knowing they should have discussed their wealth and their plans with their children, many parents still ignore the issue and children all too often only discover what they will inherit at the reading of a parent’s Will.

 

Whilst parents may be reluctant to discuss their wealth for fear of it leading to the wrong values, a poor work ethic or demands for an early inheritance, failing to educate them about money is often counter-productive. Openly talking to your kids about your values and beliefs around money, from saving to budgeting, will invariably help them deal with any inherited wealth in a mature and responsible way.

Can you really influence the financial decisions your children will make in the future?

Whilst many parents will hope that their children’s future behaviour will be based on the examples that they themselves have set, there is no guarantee that this will be the case. For every parent that believes their children will demonstrate a strong work ethic and a high degree of financial responsibility, you’ll find another that will worry their child will marry a gold-digger or throw money around like confetti.

 

If you think all the talking and financial education in the world won’t help, one option for this lack of trust, is a trust. Discretionary trusts enable you, or the trustees, to retain control over how the money is invested and how and when your children can access the money.

How do you teach good money management?

Three ways you can lead by example

  1. Saving & investing for goals - Being open about saving and investing for specific goals and sharing the risks, wins and losses you experience, will give your children an understanding of the importance of money management, the power of compounding and how to reach a goal in a planned manner.
  2. Being organised – If you can openly show you maintain budgets, review your cashflow regularly, ensure bills are paid on time and regularly check your investments, it will communicate a sense of financial stability and control that your children will absorb. The converse is equally true.
  3. A measured appetite for risk – It’s almost a given that children will be influenced by the type of investments their parents make. So, demonstrating a considered and measured approach to investment risk, and explaining decisions, is likely to influence their future approach.

Want to discuss Inheritance Tax Planning?

Get in touch with your local Investec office today.

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Investec have supported me in being able to take early retirement at 56, given me advice as to how best support my grown up children as they take on life's commitments, and in managing the legacy I received following my mother's passing in 2016.

Simon F, Leeds

Your next steps

Is your family financially secure?

No one knows what’s around the corner, which is why it’s important to financially protect your family and safeguard their future.

How Financial Planning can help you

Whether it’s understanding how to ensure your family could cope financially if you were no longer around, or investing for your children’s future, Financial Planning will help you understand where life can take you. At Investec, we align your life goals with your personal finances to help bring financial clarity to whatever needs, goals or ambitions you have in life.

Ready to have a conversation?

If you’d like to have an informal, no obligation conversation, or have any questions about keeping wealth in your family, please get in touch.