Succession planning: The challenges of wealth transfer
When Russian oligarch Boris Berezovsky passed away last year, it was the beginning of a well publicised series of estate woes – of his five nominated executors, not one agreed to take the role, and experts believe it could take months or even years to resolve a fractured and complex inheritance framework. Antonio Risorto, Director in our Key Clients and Family Offices team, explains the value of early planning.
You may think the example above is an extreme one but unfortunately complexity and confusion surrounding succession planning are more common than people perhaps realise. In research conducted last year, we discovered that 40% of the high-net-worth individuals (HNWIs) who took part have experienced conflict as a result of inherited wealth. A third of the respondents said they were concerned about the future of their legacy in the hands of their children, and perhaps more surprisingly, a quarter of them did not even have a will.
We know from experience of working closely with our clients that there are different schools of thought when it comes to issues such as inheritance. Some people might think their wealth could enable their children to have a better start in life, whilst others might be concerned to make sure wealth doesn’t spoil their children.
There is no right or wrong way to look at it as it ultimately comes down to personal choices and attitudes, but it is also worth remembering that succession planning isn’t uniquely about post-death legacies. You may for example want to do something philanthropic in your lifetime, and as our Philanthropy Guide explains, there are numerous ways to go about doing this. (For more information on the Guide, please do speak to your Private Banker.)
Getting the right advice is crucial
Without doubt, succession planning can present an often-bewildering maze of options, and it becomes even more complicated when assets are located internationally and therefore subject to differing tax and legal regimes. The mistake that many people make is to allow such obstacles to act as a deterrent, preventing them from addressing fundamental inheritance issues.
At Barclays however, we aim to help clients confront and overcome these difficulties and look to reach a solution tailored to their specific needs and goals. Whilst we’ve always helped clients deal with so called ‘treasure assets’ – such as collections of cars, jewellery and paintings – it is noticeable how much more frequently these sorts of assets might spread internationally. And if a client has multiple properties in different places, these will also be subject to different laws, taxes and succession regimes.
We provide an holistic picture of client needs, so that the overall ambitions of how your wealth is passed on, are considered. This begins with our Client Advisory Framework process: a first-stage, detailed consultation that enables us to get a clear view of the big picture.
Unlike other banks, we do this holistic thinking up-front for our clients, and our Wealth Advisors are fully integrated into the Private Banking team, at all of our international locations. How we implement each client’s plan depends on what they need – whether it’s external specialist tax or legal advisor, or trust and insurance experts.
Managing communication and cultural issues
When it comes to transferring wealth and financial legacies, there are a number of cultural differences which need to be recognised when we work with our clients, either in the UK or internationally. We know that in Indian culture for example, there is a common consensus that it is important to follow into any family trade that has enriched previous generations, but this level of expectation isn’t shared by other countries around the world.
In Western cultures, there is more often a concern about the impact that a vast inheritance might have on the children or adults who receive it. Interestingly, this concern is more prevalent among those who have earned their wealth rather than inherited it, with people keen to see a demonstration of work ethic before they pass on the fruits of their labour.
One trend that transcends all cultures however is the potential for internal disagreement and conflict within families, particularly in cases where the deceased individual is survived by multiple wives and children. Clearly there is no single strategy which can be applied in these instances, as each family has its own dynamics and relationships. It may sound obvious but in times of stress, if all parties can maintain clear communication throughout, they can greatly improve their chances of a speedier resolution.
Given the myriad of issues surrounding succession planning for HNWIs, it is vital that families employ the right kind of expertise to help them manage what can often prove a contentious and lengthy process if mishandled.
The Barclays team aims to take that process and make it a positive one that can help wealthy individuals make decisions that will have a life-affirming impact – even after they’ve passed on. We build our Wealth and Investment Management service around strong relationships with our clients because it helps us to better understand your needs and ambitions. With the right support from the beginning of the process, it need not be as daunting as you might fear.
If you have any questions about this topic, or indeed any other topic that you think we might be able to help with, please do not hesitate to contact your Private Banker.
If you have questions relating to the articles, please contact your Private Banker.