Passing wealth between generations is much more of an art than a science. It involves understanding expectations and social pressures at least as much as tax structures and investments.
Social concerns can include protecting children from unwelcome attention as they grow and when they inherit: an education that can start to happen at a young age. In a digital world, these concerns are even more acute.
Few substantial estates are passed on now without the protection of trusts, family investment companies and advisers. All of these help the process.
Dynamics and stewardship
But whatever protection is given to substantial wealth, the emphasis for those passing it on is financial education and good stewardship. Above all, there is usually a family dynamic to respect and often a shared purpose.
However, as with any family, conflicts can arise, and these can test the bonds holding people together. Making sure that all needs are met can involve a great deal of thought about the individuals concerned, their interests and how to find a balance with the family’s needs as a whole.
Responsibilities and reputation
There may be duties to employees and shareholders. There may also be a wish to display a particular public profile, or to completely fly under the radar with utter anonymity.
Advising young people who are in line to receive life-changing fortunes therefore requires emotional intelligence and sensitivity.
Protecting childhood innocence
It can be an awkward or even anxious time when a high net worth family decides to engage in educating their children or others in the family about their inheritance. Awkward because families with substantial wealth usually dislike drawing attention to themselves and that can be another reason to put off this discussion with heirs. Anxious because the instinct may be to shield children from too much knowledge about the extent of family wealth, for fear of overburdening their childhood.
In my experience as a private client adviser, most young heirs do have a sense that there is considerable wealth in their lives, but rarely an idea of how much, why it is there and what they might expect to inherit.
Sensitive timing
Deciding the right time to start the conversation with them is a judgment call that depends on the individuals concerned but, in my view, it is best started in the mid-teens. The American writer Christian Nevell Bovee said, “Youth is the season of receptivity…” and I tend to agree.
As the trusted adviser to one family, I was asked to help in the process of advising a 13-year-old, who was unaware that he was already due to inherit millions of pounds. I began by encouraging him to understand the idea that what is important is what things mean, not their cash value. Therefore, an important first step in preparation and education is to give a grounding in whatever combination of cash, property, business, shareholdings or land sustains the wealth that the heir will inherit, and the expectations that come with those.
Preparation, education and confidence
As children of the wealthy approach adulthood, a gentle but very real programme of education, delivered by a seasoned and trusted adviser, will prepare them for the responsibilities that they will manage in the longer term. This readiness has the potential to release them from any sense of dread they may have harboured and build their confidence as well as provide a sense of trust and contentment in their parents.
