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Finance: Eight steps to successful succession

PUBLISHED: 13:16 06 January 2015 | UPDATED: 13:16 06 January 2015

Passing wealth on needs careful planning

Passing wealth on needs careful planning

(c) Marc Debnam

It is estimated that £1trillion will pass down from one generation to the next over the next 20 years. Matthew Holmes of Coutts Wealth Management outlines an eight-point succession plan for peace of mind

Many families transfer their wealth successfully – yet there are many others who struggle to meet this aim. Balancing the family’s immediate needs and interests often conflicts with making sure the family’s wealth is there to benefit subsequent generations. Add in factors such as perception, temperament and ability and it is easy to see why finding the right balance can be a complex and daunting task. It also explains why discussing wealth has been a taboo subject for many families.

It is understandable that many families don’t want to talk about passing down wealth. It is a complex area since there is no blueprint and there are a number of factors to consider.

But wealth succession is not just about the practicalities of transferring money and assets to future generations. It is also an emotive subject. In the recent Coutts report Breaking the Wealth Taboo: making succession a success, we found that a third of families with a net worth of more than £5m said they had experienced conflict when it came to succession planning.

Families are also becoming more complicated in their make-up – second and third marriages are part and parcel of family life and this means stepchildren and step-grandchildren are being brought increasingly into the wealth succession mix.

But obstacles can be overcome and the process, with planning and foresight, can be a fulfilling and smooth journey. Simply talking about it can help. Those families who start to plan earlier stand a far better chance of achieving their desired outcomes than those who don’t.

An eight-step journey to help families pass down wealth

1. Vision To start with, you should have a clear vision for your wealth and share it with your family. The more time spent thinking about this, the easier it will be to articulate and plan for.

2. Purpose Consider the purpose of your wealth. For most, its primary purpose is to provide a secure, comfortable and nurturing environment for your family, with access to opportunities such as education.

3. Concerns Only by understanding and articulating your concerns with your family can you start to protect against any potential conflict and prepare the next generation for the future.

4. Fairness Most families value fair distribution of wealth highly, but realise quickly that equality is not always the fairest method and is not easy to achieve for a number of reasons.

5. Know yourself Everyone has different attitudes to wealth and varying philosophical outlooks. Understand your own attitudes and you will be better able to consider 
the impact of these views and plan accordingly.

6. Prepare Our research shows that if the next generation is poorly prepared for wealth transfer, it will find it hard to fulfil the responsibilities of managing matters in the future.

7. Practise An important part of preparing the next generation is to empower them gradually to practise managing their family’s wealth in a gradual and controlled manner.

8. Wealth preservation A key component of any plan is to identify and mitigate future risks. Some families have generations of experience, while others rely on advisers – there is no right answer.

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