Money, family and estate planning: Expert tips for awkward conversations this Talk Money Week

It’s Talk Money Week, where people all around the country are encouraged to have those uncomfortable conversations. Unfortunately, money can still be considered a very taboo subject. This can be problematic, especially as family wealth management can have far reaching consequences.

The importance of estate planning and family wealth management

Having discussions with your family about the plan for the passing down of assets to the next generation can avoid future conflict, ensure that wishes are fulfilled and provide the right support and protection for assets with blended families or vulnerable beneficiaries.

If there is no Will or it’s invalid, assets are passed down under the rules of intestacy, which is a pre-defined order of beneficiaries set out by the government. There is a strict hierarchy to these rules, and many families would likely find that it didn’t meet their wishes.

Failing to plan ahead can also mean that there is a large inheritance tax (IHT) bill to pay, which could have been reduced or avoided completely with the right estate planning strategy in place. 

Three simple conversation starters

Mickey Armstrong, financial planner at Bestinvest parent company Evelyn Partners has some guidance for having these conversations this Talk Money Week.

“The key point to remember is that assets are going to be passed down one way or another. The question is whether you want this to happen in a structured manner, where you can influence the transfer and ensure everything is set up correctly, or to pass down an undefined amount at an unknown time in the future.”

1. How do you want your beneficiaries to benefit from this money?

This conversation can include discussion around whether you want to split the money equally between children or give different amounts. It could also identify whether you want to earmark the money for something specific, such as contributing to a retirement fund or paying off a mortgage.

It’s worth noting this doesn’t have to mean gifting during your lifetime. These questions are just as important when writing a Will.

These considerations are equally as vital if you do not have children. You may well have a wider range of potential beneficiaries, such as siblings, nieces and nephews, friends, charities and more.

2. Who could help manage your assets when you go?

This is particularly relevant for those in a couple where one partner largely manages the wealth. If they were to die first, who would take control? When both partners have gone, the executor of the estate will need to manage the sale and transfer of the remaining assets, and this person needs to be trustworthy and competent.

There are different rules on death depending on whether you are officially married, compared to being single or in an unmarried relationship.

But whether you are married, in a relationship or single, you will need to decide on who will be the executor, and who will be the trustees for any trusts you decide to set up. You may want to consider trusted friends or even a professional trustee if your estate is large enough to justify the costs involved.

3. Are there any risks within the family that your estate needs to be protected against?

This could be a member of the extended family you have concerns about, someone in the family with an occupation that comes with a high risk of litigation, or someone with problems like addiction who you wouldn’t want to hand a large sum of money to without careful planning and management.

Trusts can be a valuable planning tool in these instances. You can elect trustees who are then in charge of managing the assets for the benefit of the beneficiaries, and they can control how and when payments are made from the trust.

Armstrong says, “These questions won’t solve an IHT problem or give you the answer as to which type of trust you should setup, but they will give you a much clearer view on what you want to happen with your money when you die. From there, an estate planning strategy can be created which ensures that the right people benefit, in the right way.”

Considerations for blended families or vulnerable beneficiaries

The more family members you add, the more complex the situation can become. This is particularly true when talking about blended families, where two estates are brought together, or when there are vulnerable beneficiaries such as people with disabilities.

This is an area where professional advice is highly recommended, but here are some important considerations to keep in mind.

Intestacy rules are almost certainly inadequate. For example, married or civil partners are first in line, even if they were separated (but not divorced) at the time of death. If the deceased has children, the surviving husband, wife or civil partner receives the first £322,000 (and the entire estate if it is less than this amount), and half of everything above this threshold.

Any jointly held assets (like a property) are automatically passed to the surviving husband, wife or civil partner and won’t be included in the estate at all.

Planning for the marital home. Where a couple with a blended family share a home, it may be owned in just one of their names or as tenants in common. This can cause problems if one partner was to die, with beneficiaries potentially able to force a sale of the property.

That problem can be avoided by ensuring the Will stipulates the right for the surviving partner to stay in the house for a specified period of time, potentially even the rest of their life.

Vulnerable beneficiaries. For families with beneficiaries that are unable to manage their own affairs, forward planning is even more important. It’s not just about maximising tax-efficiency or avoiding future arguments, it can be about safety and quality of life.

Trusts can again be an important tool in this instance, with special tax treatment for disabled beneficiaries. Trusts can also be used for beneficiaries who don’t have a disability but may have struggles with addiction or other mental health issues.

In both cases, putting the right person in charge can provide peace of mind that their finances will be managed safely once you’re gone.

These are just some examples of the types of complexities that can come up. The important thing is to have these conversations early and ensure the right Will and estate plan is put in place.