It can be difficult to talk about money with loved ones. This doesn’t change the fact that it is still one of the most important conversations you may ever have, which is why the introduction of a neutral third party can prove invaluable.
The perception of estate planning as complex, together with the fact that money is so often a taboo subject, can make people reluctant to engage in these types of conversations. The evidence of inaction is not hard to find. For example, a National Savings and Investments survey found that only 7 per cent of people have spoken to their parents about inheritance, despite the fact that intergenerational inequality is at its highest ever levels.
The fleeting nature of intergenerational wealth really underscores how difficult it can be to preserve an inheritance. The trend for the earnings of one generation to largely disappear by the third generation is so commonplace that there is an idiom for it the world over. The Chinese expression for this translates to “wealth never survives three generations”, while in the US, it is known as “from shirtsleeves to shirtsleeves”.
For the older generation, this highlights how difficult preserving your legacy can be; to ensure that the wealth accumulated over a lifetime is fairly and effectively shared between surviving family members.
Perhaps one of the main reasons why people are so reluctant to talk about money is because of the potential for families to fall out over it. The number of disputes involving inheritance and the validity of a will jumped 69%, from 97 in 2013 to 164 in 2015, according to government figures. One of the reasons behind this is the stratospheric rise in UK house prices, which has greatly boosted the value of people’s estates and potentially raised the financial incentive to challenge a will.
The importance of having the money conversation with your loved ones cannot be overstated but this realisation does not make it any easier to actually put the wheels in motion. How many of us have collections of savings and investment paperwork that have built up over a lifetime? How much of it is actually useful? No one wants their children to fall out over money but what can you do to ensure there will be no feelings of resentment? Children don’t want to ask their parents how much they are worth either, which just lowers the odds of the money conversation occurring.
The introduction of a neutral third party to the process can be extremely effective when it comes to formulating a plan that works for everyone. A financial planner can begin by helping you collate your legacy in order to ensure that everything is accounted for and can be earmarked for the future. This can sometimes even turn up unexpected results, such as long-forgotten accounts or other misplaced assets.
Once you have a more comprehensive idea of what you stand to leave behind, a financial planner can create a holistic plan for the family that is both fair and impartial. The rise in the number of contentious estates reflects the capacity people have to feel like they have not been treated fairly.
People rarely respond well to being caught on the back foot, especially where money is concerned. A neutral party working to the advantage of everyone involved can be an effective remedy.
We will often choose to replace difficult conversations with silence; an approach which can seriously damage the quality of our lives. A meaningful conversation about money works to the benefit of everyone. A financial planner can help you find your starting point and help you ensure the process is fair and clearly communicated to all involved.