Are your children ready for your wealth?
How a carefully crafted plan for passing on your wealth could help prepare your loved ones for what’s to come.
2 min read
Perhaps you made your money tirelessly working your way up through your chosen profession. Perhaps you’re very talented at something popular and lucrative like acting, sport or music. Or perhaps you had a ‘big idea’ and the entrepreneurial nous to make something of it.
Financial reward is often the result of a spectacular skill-set, steely determination and, sometimes, some luck setting you on a path to high achievement.
But what happens when you pass that legacy on to your children?
Their path may well look very different to yours. For many of them, wealth has simply always been there. For others it could still be relatively new. Either way, it can come with significant challenges.
Despite the great opportunities wealth brings – such as access to the best education and health care – stepping into your shoes can be more daunting than amazing. It can actually create an acute sense of insecurity. How do they live up to the success of their forebears? Will they – whisper it – be the generation that loses the family wealth?
Always be prepared
This is where a good succession plan comes in. Drawn up by the whole family, it can help ensure your wealth is passed on properly while preparing your loved ones for the life that comes with it.
It involves agreeing and articulating what your family believes wealth is for, setting out a plan to prepare the next generation to take the reins and getting the right blend of financial products in place.
The process can help sort out a lot of important issues right from the outset. For example, many members of the next generation think the only way to fulfil their family legacy is to continue making lots of money. But financial reward is just one way to be successful – philanthropy or pursuing an interest you truly love being just two worthwhile alternatives.
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At Coutts, we have helped hundreds of families on this and, in our experience, there is no one way to get it right. It depends on each family’s priorities and needs.
There are, however, a few basic guidelines it’s worth keeping in mind…
It’s good to talk
Firstly, communication is critical. As Coutts associate director Stuart May explains: “Families often avoid talking about passing on their wealth for various reasons – from embarrassment to concerns about conflict. But we’ve found that discussing your values, hopes and fears openly and honestly, while developing a shared plan for the future, can actually bring families closer together.”
Secondly, while talking is important, actions do indeed speak louder than words, so it’s vital to ensure your behaviour backs up your values. For example, if you have a family business and would like your children to work for it one day, it’s good to show through your actions that it’s a rewarding experience, not just a stressful one.
And thirdly, it’s really important to have the financial ‘nuts and bolts’ in place. The list of what we think you might want to consider is long, and includes:
- ensuring you have an up-to-date will
- sorting out your pension, perhaps even setting one up for your children
- investing to potentially help you maintain the value of your wealth ahead of rising prices
- setting up ISAs for tax-efficient, long-term saving
- thinking about how you help your children on to the housing ladder
Stuart says, “Giving all this some serious thought is well worth it. And at Coutts, our experts can support you and your loved ones through the whole process – dealing with both the practical and personal aspects.”
Basically, we can help ensure that, for your family, being wealthy stays amazing for a long, long time.
For more information, contact your private banker or wealth manager.