Rachel Griffin of Quilter was disinherited when she was young – but her story is all too common. What can be done to ensure your wealth goes to the people you want it to go to?
The importance of will and trust planning in complex families is something that I feel passionate about. After experiencing first-hand the turmoil that can follow when a parent dies without a will, I want to highlight how a few simple steps can make a big difference.
My mother died when I was 21. She didn’t write a will; she probably didn’t feel that she had enough money to justify writing one, or was too young (she was only 48). Following her death, all her personal possessions and any wealth that she had automatically passed to my stepfather. This left him in full control to decide what should happen to my mother’s personal possessions, house and savings.
While I didn’t agree with his decisions, I didn’t think that I had any legal right to challenge them, even though I knew my mother’s wishes were not being followed.
Unfortunately, my story is not unique. Complex families are the new norm, and it is important that people think through the financial implications of their death, especially if they want to financially protect any children that they have from a previous marriage.
One of the best ways that could have helped avoid the situation I found myself in and ensured that wealth was passed on to its intended recipient, is the use of a trust. Often people think that trusts are complex or just for the wealthy to save tax, when in fact they are a simple way of gaining peace of mind in regard to how your assets are handled after you die.
According to a survey that we recently commissioned around the use of trusts, only 40% of the 779 people questioned had set up a trust, even though 65% of respondents believed that it was a good way to safeguard wealth.
Further data from the survey shows just how good trusts can be at protecting money for future generations, with 62% of respondents who had set up a trust saying that it gave them peace of mind. An additional 60% chose trusts because it allowed them to choose their beneficiaries and 50% believed that they offered an element of security.
There are lots of different trusts to choose from, with varying levels of access, flexibility and inheritance tax efficiency to suit specific needs.
While trusts are one of the best ways to make sure that wealth is passed down to its intended recipient, there are a number of other simple steps that can help protect money for future generations:
Talk about what you want to happen
Discussing as a family what and how assets should be distributed on death can help break down any barriers, so that everyone is in agreement and there are no surprises.
Write a will
It seems so obvious, but around 60% of adults in the UK have not written a will. Wills aren’t just for deciding how valuable assets are divided on death – they are also used to determine how any personal belongings and sentimental items are distributed.
Never assume that your remaining family members will amicably split your personal possessions, and never underestimate the anger and resentment that can bubble up in families when a will is not in place.
Keep the will updated
Don’t just write a will and forget about it. If your circumstances change, you must update your will.
Create a will trust
A will trust becomes effective only when someone dies and is a way for assets to be protected and distributed to beneficiaries in the future.
Write policies in trust
If you have a life assurance policy or pension policies, ensure that you have either written them in trust or beneficiaries have been nominated – and that these are kept up to date following any life events.
Make gifts in your lifetime
There are many tax-efficient ways to pass money on to loved ones during your lifetime, and these can help enable the younger generation to benefit from wealth at an earlier stage. Any family heirlooms can also be passed on during your lifetime.
No one knows what the future holds – even if you don’t think that you’ll end up being part of a complex family structure, you or your children could be at some point in the future.
Rachel Griffin is a tax and financial planning expert at Quilter.
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