Talk Money Week: Talking to children about money, inheritance and future plans
By Kat Wainman, senior associate in the Tax, Trusts and Estates team and Heather Roberts, senior associate in the Will, Trust and Estate Disputes team
Having conversations about money with your children can trigger many different concerns and emotions. However, having these conversations openly and in advance of life events can certainly ease any difficulties that may arise.
When working with families to help them plan for what will happen to their assets when they die or lose mental capacity means we see many different attitudes to the financial education of children, and openness about financial matters.
Families which involve children in their teens or early twenties and give some financial responsibility, seem to encounter fewer difficulties in the longer term. Of course, this may be down to many factors. Children are all individuals, and we each have different views as to how much information we feel is appropriate to share.
Gradually involving children from a relatively young age though helps them gain an understanding of money. We have clients who bring their sons and daughters along to meetings about their succession and estate planning, and this is something we are happy to engage with and work within clients’ boundaries.
Particularly in the context of a family business, equality between children on death may not necessarily mean a fair, or even viable, split of assets on death. Whether based onbeing the first-born, or because one child works in the business, this is something best spoken about openly if possible.
How these subjects are raised with children will depend very much on the particular family dynamics. If all the family can discuss matters openly and honestly together this is probably the preferred option. However, there are many families fragmented by geography, divorce and re-marriage, and differences of opinion.
When advising on estate and succession planning we often work with clients to draft letters of wishes to sit alongside formal documents, detailing what they want to achieve and why. Such letter of wishes can serve as a useful aide memoir when speaking to your family and ensuring clarity and consistency.
However it is best to tread carefully when raising financial matters with parents as the risk is that the good intention of making sure they put everything in good order is misconstrued as self-interest. Try to keep the focus on the need for clarity and certainty in the event that they died or become unwell so that their wishes can be carried out as they would want them to be.
The importance of having these discussions with families as early as possible help to minimise problems that might arise after someone has passed away. Acting early in the planning stages, also helps to avoid family member claims against estates, where sometimes, the proper planning has not been done.
Sometimes family members are surprised at the decisions made by the loved ones, and try to bring claims against their estate. In these cases, having very detailed records of why certain decisions were made, along with a clear and professionally drafted Letter of Wishes, can be crucial evidence to bring the claim to a swift conclusion.
Having these discussions during your lifetime, to avoid any ‘surprises’ can make a significant difference. Claims against estates are very costly, and can run into the tens of thousands of pounds, and ultimately, the estate will bear a large amount of these costs, reducing the amount available for the beneficiaries. We know this can sometimes be a hard conversation to have, but the reality is that it is much harder if nothing is done.
