Having worked hard to build their wealth, parents naturally want to protect it and see it eventually pass to their children. However, parents could potentially be just three bad decisions away from risking their children’s inheritance, and leaving them with nothing.
Decision 1: Leave all wealth to surviving spouse.
When a couple have been together a long time, and have children together, it is natural to leave wealth to the surviving spouse, and then leave the surviving spouse to distribute assets to the children when they pass away.
New research from Quilter¹ shows that 67% of parents plan to leave all their wealth to their surviving spouse. However, no one can predict what the future holds, and parents risk having no control over how their spouse distributes the money later on, and whether it will eventually pass to the children.
Decision 2: Not factoring in the possibility of the surviving spouse remarrying.
Research shows just 28% of parents think their spouse would remarry in the event of their death. In reality, no one can predict whether or not their surviving spouse may eventually meet someone else.
But worryingly, nearly half of parents say that if their spouse remarried, they would have concerns over how their wealth is passed on in the future.
Decision 3: Not considering trust planning.
A trust is one of the safest ways to preserve wealth for future generations. It is a legal arrangement which ring fences money for future distribution to stated beneficiaries. If a surviving spouse remarries then a trust helps protect the wealth, ensuring it remains in place for the intended beneficiaries.
This can be particularly useful where children or grandchildren are still young, and the parent wants to protect wealth for their future, and have controls in place as to how and when the children/grandchildren can access the money.
Research shows 36% of parents would definitely consider using a trust, with a further 41% saying they may be interested in using one.
Start the conversation with clients
These three decision points are designed to encourage clients to think about what might happen in the future to their wealth, and how quickly their children could end up being disinherited.
With at least three out of four parents saying they want to control how their wealth is passed on, there is clearly a strong appetite for parents to engage in trust and estate planning discussions. This creates plenty of opportunities for financial advisers to demonstrate real value to their clients.
Death and inheritance shouldn’t be seen as taboo subjects, and clients need to talk openly with their loved ones about their wishes. Through open conversations, advisers will be able to help their clients ensure that their wealth is protected for their future generations.
¹ Research undertaken by Quilter plc amongst 479 UK parents during October 2018.
Additional Technical Support
If you have a question that was not covered online, our expert team would be pleased to help. Simply click the button below, fill in the form and our technical team will aim to be in touch within 48 hours, between 8.30am-4.30pm, Monday-Friday. Or call the team on 02380 726010.