Wealthy Britons are reluctant when it comes to protecting and dividing their wealth despite an estimated £1 trillion due to be passed down from one generation to the next over the next 20 years, a new report from Coutts warns.
The survey, Breaking the wealth taboo: making succession a success, carried out in collaboration with WealthInsight, shows that while one third of the participants (37%) admitted to suffering serious conflict within the family, when it came to dividing up the money and assets over half of HNW families (58%) did not have an up-to-date will in place.
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Coutts, which surveyed 270 British millionaires with at least £1m in liquid assets, also found that one fifth of parents were keeping their children in the dark about their real wealth over fears it will quash any aspirations they may have, or protect them from inadvertently revealing too much information to people who may then befriend them ‘for the wrong reasons’.
Wealth succession is emerging as a massive intergenerational trend in both low-growth developed markets and high-growth emerging markets globally.
Executive director at Coutts Juliette Johnson commented: "Our research shows that unless there is a clear plan and open communication about the succession process, family members can feel frightened and frustrated about how the family assets and money are divided following the death of both parents".
The survey shows that the rise in publically available information was particularly concerning for most of the families, especially the sharing of confidential family affairs via social media sites.
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By GlobalDataDespite this, only 23% of rich parents would consider insisting on or even raising the idea of a prenuptial agreement to inheritors, despite divorce rates of 42% in the UK. In the meantime, only one in 33 families confirmed passing wealth to the eldest child as the main wealth succession approach.
"It is estimated that £1 trillion will pass down from one generation to the next over the next 20 years, and while many families will make this transfer successfully, many more may not, reinforcing the old phrase of ‘clogs to clogs in three generations’, Johnson added.
| £1 trillion in wealth set to be passed down by 2035 |
|---|
| 87% the amount wealth must grow over 25 years to break even |
| 58% of people do not have an up to date will |
| 1 in 3 families dealing with succession suffer conflicts |
| 56% of high-net-worth individuals worry they pay too much tax |
| 36% want their wealth to provide family security |
| 46% of wealthy families plan to divide their estate equally |
| 52% worry about the impact of wealth on the next generation |
| 30% of high-net-worth individuals begin to plan after the age of 55 |
| 69% said once wealth is passed on it’s none of their business |
Helping out wealthy families
Coutts’ survey provides an eight-step guide to help wealthy families consider how best to pass down wealth considering to families’ vision and objectives. The key steps include:
– Sharing the vision and motives for the family wealth will help planning the future. It is also important to identify and mitigate future risks to better manage wealth: the research shows that wealth advisers are the most trusted by 34% of HNW families.
– Considering the wealth’s purpose to provide a secure, comfortable and nurturing environment for the family, with access to opportunities such as education and philanthropy.
– Understanding and articulating concerns will protect against any potential conflict. For example, two thirds of millionaires (56%) worry about paying too much tax or one third is also worried about family relationship conflicts.
– Understanding fairness in the wealth distribution as equality is not always the fairest method and is not easy to achieve for a number of reasons.
– Understanding individuals’ attitudes to wealth and being better to consider impacts and plan accordingly
– Preparing the next generation proactively so they will find it easier to fulfil the responsibilities of managing matters in the future. It is also important to gradually empower them with the practice of the family’s wealth.
