Much of the estate planning work we do with clients centers around reducing an Inheritance Tax liability. This tends to be a top objective for many of the clients that we work with.
When we take the conversation a little deeper though, it often turns out that this is not really the objective – it is simply the means to an end.
The real objective is to leave a greater legacy to our beneficiaries – our husbands and wives, our children and grandchildren.
Having framed things in that way, is it then not a good idea to consider the impact that your legacy might have on your loved ones?
In many cases, people get as far as thinking about their own estate planning – ‘getting their affairs in order’, minimising tax, preparing a will and some trusts. However, very often people have not stopped to consider how much of a difference the legacy they are leaving will make to their beneficiaries.
The clients we work with are usually very fortunate financially and the sums they are leaving to children and grandchildren are what many would describe as ‘life changing’. But… have we considered how life might actually change for those beneficiaries and, perhaps more importantly, are they prepared for those changes?
Many children will be unaware of the full extent of their parents wealth and are often shocked to learn just how much inheritance might be coming their way.
As such, we encourage the families we work with to have an open conversation about this (to the extent that they are comfortable to do so). This has so many advantages:
First off, it means that the parents will actually get to hear about the impact that the gifts they are making will have on those receiving them.
Secondly, it means that the children are somewhat more prepared for what is to come and they can start to ‘get their ducks in a row around this’.
Might they need professional help to manage it? Would they like to repay borrowings? Should they buy a holiday home? These are all questions which can benefit from discussion as a family.
Finally… sometimes these conversations unearth issues that had not previously been thought about or areas where perhaps some family members don’t see eye to eye. If these things are brought to light early, they can often be resolved quickly and amicably, whereas if they are left to fester – things can get much more complicated!
