By Tim Wishart

Many facets of modern life condition us to think and act in short-term ways, forever preoccupied as we are with the various things that simply cannot wait, the numerous decisions and actions that demand our attention in any given hour, day, week, or month.

As a firm focused exclusively on managing our clients’ wealth, Adam & Company is constantly battling against this near-sightedness and encouraging our clients to ensure at least one eye is focused on a future measured in decades, rather than looming deadlines.

Even in the current economic climate – perhaps, in some cases, because of it – many families want to ensure they can pass on as much of their money as possible to their children and grandchildren, to help them achieve financial stability.

The sums involved are not insignificant. According to the Office for National Statistics, between 1995 and 2018 the total net worth of households in the UK increased from £2.8 trillion to £14.6trn and the amount of wealth passing to younger generations could double over the next 20 years, possibly reaching as much as £5.5trn (according to The Kings Court Trust, November 2020) by 2047.

Money is among the most awkward topics for families to discuss, but wealth succession planning should be on your domestic agenda, if it is not already. The Independent wrote in 2019 that

£15 billion of inheritance is waiting unclaimed, simply because people have not told their beneficiaries where their money is kept.

Encouraging open and informed conversations between generations is one way to avoid your hard-earned cash compounding that remarkable statistic, but before you gather your family around the dinner table this weekend, consider the following key points.

This isn’t just about making a will. There are also ways of transferring assets during your lifetime, which may have several advantages.

Nevertheless, effective succession planning starts with ensuring you review your will every two to three years, or whenever your personal circumstances change.

Take professional legal advice to keep it up to date and reflective of your objectives, as well as the latest legalities in the jurisdictions where you hold assets. Consider linking the value of any legacies to inflation, to ensure they maintain their “real” value.

The main advantage of using your will to transfer wealth is that you will not compromise your own standard of living. However, making gifts during your lifetime allows you to experience the joy of seeing your chosen beneficiaries benefit from those funds. What’s more, acting sooner rather than later can be a more tax-efficient way to pass on your wealth.

Everyone’s priorities are different, but make sure you strike the right balance between sharing your wealth with loved ones and retaining enough to make the most of life now and in the future. Stress-testing your desired outcomes is also prudent, to consider a range of investment return outcomes, as well as inflation projections and potential long-term care costs.

Cashflow “stress-testing” can help you make informed decisions by showing how much you can afford to give away during your lifetime, within a set range that allows for the worst- and best-case scenarios. Nobody can accurately predict the future, but you can prepare for different outcomes. After all, who was predicting double-digit inflation in major economies a year ago?

This is often the easiest question to answer

and is a personal decision that may be linked

to the decision about timing. For example,

if you have young grandchildren and your main priority is their long-term wellbeing, a trust structure might be an appropriate solution,

to help with the cost of education, or property purchases.

Your trustees could have discretion over how much to distribute to the beneficiaries, when

and to whom, within the terms of the trust

deed. You could also retain some control by being a trustee yourself and you might like

to consider benefiting charities that are close to your heart.

The answers to points one, two and three will inform the methods to be deployed. Timing plays a big part in this decision, as well as considerations around whether you can afford to gift during your lifetime.

If you can, you must decide whether to make absolute transfers or create a trust structure which, while adding complexity, may be the most effective way to achieve your objectives.

If this all feels like a lot to get your head around, don’t worry. That’s a natural and common reaction, but one that serves to demonstrate

why you should start giving wealth succession some serious consideration today, to ensure you are taking care of several tomorrows.

Tim Wishart is head of strategy and development at Adam & Company Wealth Management.