Inheritance - avoiding the pitfalls
James Bond actor, Daniel Craig, has publically stated that he finds the concept of inheritance “quite distasteful” and will not be leaving his £100 million fortune to his children. Baroness Karen Brady has told her children “they will always have a roof over their head and food in the fridge but the rest is up to them”.
Bill and Melinda Gates have pledged the majority of their wealth to charity. Those with significant wealth often worry that by passing it directly to their children they are gifting them something of a poisoned chalice.
Who wouldn’t want many millions in assets and no terms or conditions on how to use it?
Sadly, many wealthy families who pass their wealth down to the next generation without structure leave their children vulnerable to external forces, corrupt influences by those with their own agenda, and ultimate temptation.
An outright gift of significant value when in the hands of an inexperienced beneficiary can lead to the very worst outcome, wealth lost and a child in rehab or worse.
By leaving that wealth in trust for the children with a full letter of wishes and experienced trustees at the helm, the parents can see a future plan and the child has the support they need.
Trustees can be professionals well versed in the role of family trusts, friends or family members, or indeed a combination of all of these. Trusts can take many forms –a fully flexible discretionary trust or cascading life interests for example.
Leaving a gift in a trust ensures levels of guidance and protection are in place but also opens up the opportunity for significant tax planning for the entire family.
Trusts can be created during lifetime or through your will to take effect on your death. Remember, leaving a gift to a child by a will pass to them when they are just 18 years of age if you do not specify a later
age. Well drafted wills with the appropriate trust provisions included can give much needed peace of mind to a parent wanting to provide for their children. A letter of wishes can outline when the trustees should
consider appointing wealth out to a child to assist in property purchase, education or other milestone events.
The child can request an early distribution of funds and if satisfied the reason is one their parents would have endorsed, often trustees have powers to release assets to the beneficiary early.
However, if the reason is unsound or unsafe funds are retained until the child is older and, one hopes, a little wiser.
Our private client team can advise if you need further support or assistance.
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Lesley works closely with her clients to assist and guide in all aspects of complex estate planning and asset protection including trust and estate administration after death, Wills and Powers of Attorney.