Eight steps to managing your inheritance successfully

Mark Yellops

Mark Yellops - Credit: Archant

A guide to successful succession from one of the country’s leading wealth management companies

It is estimated that £1trn will pass down from one generation to the next over the next 20 years. Many families will transfer their wealth successfully – yet there will be many others who will struggle to meet this aim.

Balancing the family’s immediate needs and interests often conflict with ensuring the family’s wealth is there for the benefit of future generations. Add in human factors such as perceptions, temperament and ability and it is easy to see why finding the right balance can be a complex and daunting task. It also explains why discussing wealth has been a taboo subject for many families for so long.

It is understandable why many families don’t want to talk about passing down wealth. It is a complex area since there is no blueprint and there are a number of factors to consider.

But wealth succession is not just about the practicalities of transferring money and assets to future generations. It is also an emotive subject. In our recent report Breaking the Wealth Taboo: making succession a success, we found that a third of families with a net worth of more than £5m said that they had experienced conflict when it came to succession planning.

Families are also becoming more complicated in their make-up – second and third marriages are part and parcel of family life and this means that step-children and step-grandchildren are increasingly being brought into the wealth succession mix.

But obstacles can be overcome and the wealth succession process, with some planning and foresight, can be a fulfilling and smooth journey. Simply talking about it can help. We have identified an eight-step journey to help families consider how best to pass down wealth.

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1 Vision - To start with, you should have a clear vision for your wealth and share that vision with your family. The more time spent thinking about this, the easier it will be to articulate and plan.

2 Purpose - Consider the purpose of your wealth. For most, its primary purpose is to provide a secure, comfortable and nurturing environment for your family, with access to opportunities such as education.

3 Concerns - Only by understanding and articulating your concerns with your family can you start to protect against any potential conflict and prepare the next generation for the future.

4 Fairness - Most families value fair distribution of wealth highly, but quickly realise that equality is not always the fairest method and is not easy to achieve for a number of reasons.

5 Know yourself - Everyone has different attitudes to wealth and varying philosophical outlooks. Understand your own attitudes and you will be better able to consider the impact of these views and plan accordingly.

6 Prepare - Our research shows that if the next generation is poorly prepared for wealth transfer, they will find it hard to fulfil the responsibilities of managing matters in the future.

7 Practice - An important part of preparing the next generation is to gradually empower them to practise managing their family’s wealth in a gradual and controlled manner.

8 Wealth preservation - A key component of any plan is to identify and mitigate future risks. Some families have generations of experience, while others rely on advisers – there is no right answer.

For more information about becoming a Coutts client in Yorkshire, contact Mark Yellops, executive director, Coutts Sheffield on mark.yellops@coutts.com or 0114 291 9242.