Planning what happens after your death can be uncomfortable. Yes, you’re preparing and reviewing your will to ensure practicalities are dealt with and your assets are distributed according to your wishes. But it can be tough. It’s even more difficult to have conversations with loved ones about the less tangible things that really matter, like your legacy.
For some, the notion of legacy planning gets confused with estate planning given it’s another set of instructions about what happens to your assets and ‘chattels’ (i.e. belongings) when you die. For others, leaving a legacy feels like an approach reserved for the ultra-rich or (in)famous celebrities.
The real intention, however, is that you ensure the beliefs and principles that have underpinned the creation of family wealth are passed on to the next generation, which is just as important as ensuring assets pass as tax-efficiently as possible. It can provide immense comfort and reassurance that the wealth that you’ve worked so hard to grow and protect will continue to be used, or invested, according to the values you’ve espoused.
So, what does it take to ensure your succession plan is a success?
1. Connect the generations
There are so many challenges in today’s world. Families grow and relationships may quickly become complex and diverse – multiple marriages, family disagreements and blended families are just some of the reasons. Today’s work presents multiple challenges to succession plans and can dilute the values that are important. As Mary Humphreys, senior manager at Nedgroup Trust, explained in a recent webinar: “A lack of family connectivity can threaten the success of the generational wealth transfer, as the following generations are too removed from those who created the wealth.”
Despite these challenges, we know there are a number of ways you can create and build your legacy. It ‘simply’ involves helping successive generations to understand your motivations and values, and to consider your principles as a guide when making decisions.
And while this isn’t always the easiest of hurdles benefactors face, it’s not actually that difficult if you frame your history (and that of your money) as a story – and one which doesn’t have to rival the intricacies of War and Peace given it boasts nearly 600 characters.
2. Have a conversation
With families often becoming more complex, speaking to your family about what matters to you is a good starting point. Sharing the origin of the family business or its wealth, helping them to understand how the financial aspects have grown, what decisions you’ve taken at key moments, and the issues that are important to you, can help them be part of the narrative.
Over the years, this can help articulate a set of values that become family values.
And even if the topic is not something you’ve discussed before, it’s never too late. Just opening a conversation about the practicalities of transferring your wealth could provide a useful starting point.
3. Prepare a letter or statement of wishes
hether you are a natural narrator or not, another starting point can be to write a letter/statement of wishes to help formalise what’s important to you and how you would like your wealth to be managed after your death.
Many people find these useful as they are not legally binding and do not need to overcome the same hurdles that drafting a will requires. As such, creating and reviewing your statement of wishes alongside your will is a good idea, not least as it is confidential and will not be published, as a will currently is post probate.
In our view, Peter de Vena Franks, campaign director at Will Aid, summed it up nicely when he stated: “[a letter of wishes can] be key to managing family expectations, wealth, the family business and general family dynamics”1.
Your statement of wishes can help guide and explain decisions made around the distribution of assets and provide a template for you to guide the preservation, protection and growth of the family wealth in line with your values.
4. Establish more formal structures
While you may already deem the discussion to be complex, and investment and wealth structures would add to that complexity, it’s worth considering the various options available to help protect and preserve assets, not least as these can also help instil family values into future generations.
One relatively simple option for UK families is establishing a donor advised funds, which can help you embrace philanthropy without the administrative and regulatory burden of a foundation.
Donor advised funds can be set up through a specialist provider to deliver a cost-effective, tax-efficient way to invest in causes that are important to you.
There is also the option of setting up philanthropic funds through a foundation or a focused family investment company, which can be useful for those who want to leave behind a broader philanthropic legacy or who hold a particular cause dear. Adding family members from successive generations as part of the decision, or oversight, process can also help ensure they are on board with your enduring aims and values, and can provide everyone involved with a deeper insight into what the family wealth means and what it can achieve.
No longer the preserve of the ultra-wealthy, family office service providers can help establish a deep sense of connection within the family, helping to manage different personalities, entrenching core values and helping to educate the next generations on the guiding principles surrounding family wealth. Providing a structured environment and supported by a family officer, they can be a key part of next generation planning and uphold a family vision of future wealth.
And, if you or your spouse are not from the UK, leaving your wealth in trust can help you retain some control over how your wealth is managed after your death through the involvement of trustees, who are (professionally) mandated to manage and oversee the distribution of assets in accordance with the terms set out in your trust deed [also known as a trust instrument in some locations]. Here too, you can guide these individuals through pre-set controls, and set out the values and purpose behind your wealth with a letter or statement of wishes that can put in place the approach that can be maintained in the future.
Whatever you want your legacy to be, the key to making it happen and ensuring that your successors uphold it, is to start having conversations about the stories behind your family wealth – how it was built, what it means to you and why you made the choices you’ve made along the way. Share your values with them and help everyone really understand what your wishes, hopes and ambitions for the future are.
If having those conversations feels overwhelming, or you just need a little support to get started, we can help by facilitating those discussions, helping you establish a clear idea of what’s important to you and how best to express that and – only then – determining how best to share it with the next generation.
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Any examples of investments and structures used are for illustrative purposes only. The inclusion does not constitute an invitation or inducement to buy any financial investment or service. None of the content constitutes advice or a personal recommendation. Individuals should seek professional advice, based on their jurisdiction and personal circumstances, before making any financial decision.