A Parent’s Guide To Passing On Wealth

The seriously wealthy have teams of tax lawyers, accountants and financial advisors all set up to help them pass down their wealth in a tax efficient manner whilst protecting the family pile from opportunist daughters or sons in law.

But it is not just the mega-rich who need expert advice and can reap the rewards. Businessmen and women who have worked hard to build up a strong and profitable company, a more than just comfortable family home and an investment portfolio. How do they fare when trying to protect what they have so painstakingly built up over the years?

Passing wealth successfully between generations doesn’t just happen. You may be looking to give a financial helping hand to the younger generation, particularly in this time of economic uncertainty, to pass on the reins of a family business or to reduce the eventual inheritance tax burden. Whatever the current motivation, longer term strategies informed by expert advice work best when it comes to providing for the next generation in a tax efficient and measured way with some protection from life’s inevitable risks.

This requires an understanding of the expectations and needs of the next generation, the risks to which inherited wealth may be exposed and legal, tax and investment frameworks which can help manage all of these factors.

There needs to be recognition of the pressures and risks which face young people today especially in a digital world and an exploration of personal viewpoints and values. How much is too much, too soon? How best can the next generation be educated and involved in the preservation and management of the wealth they will inherit? What role might trusts and family investment companies have to play?

This calls for a common purpose on the part of advisers and shared understanding of what the parents are trying to achieve. It calls for a realisation on the part of parents that making simple gifts may save tax but expose the value given away to the risks of early death or unforeseen divorce.

A great deal of thought may also be needed about how to balance the family’s needs as a whole whilst avoiding conflict.

This quite apart from potentially conflicting duties to other shareholders and beneficiaries where there is a business involved. Our Family Team took over a case for a divorcing business-woman who had instructed a niche corporate firm to act for her in blissful ignorance of the fact that the divorce courts have the power to order the transfer of shares between separating couples. In another case, a father gifted a significant sum of money to his daughter only to have her husband leave her six months later and take her to court for half of it. Had the parties taken advice right at the beginning, from lawyers able to advise in the round, they could have saved themselves significant sums in legal fees later on. We managed to protect the inheritance in that case although the client changed lawyers too late in the first example and lost her shares in the business to her husband.

Here at Geldards, we have expert lawyers across a broad range of legal disciplines all under the same roof who can combine their expertise around family law, company law and trust and tax planning to ensure the best possible results for you and your family. We also regularly work alongside other professionals such as accountants and financial advisers to ensure a joined-up approach to advising our clients.

This means we are able to provide comprehensive advice on the best possible way to protect gifts and inheritances from the effects of death or divorce. We can advise on trusts, cohabitation agreements, pre and post nuptial agreements and changes to company structures all with wealth preservation in mind and share with you other tax planning strategies tailored to your and your family’s circumstances and needs.

For further information please contact Fiona Apthorpe on 01332 254124 fiona.apthorpe@geldards.com , Claire Johnson on 02920 391728 claire.johnson@geldards.com or Erica Thomson on 01159 833745 erica.thomson@geldards.com.