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Everybody wants to leave something behind for their family. Whether it be property, business, or other forms of wealth, it’s important to plan ahead to ensure that the wealth you leave behind is used correctly, does not sow discord among your remaining family members, and will help your benefactors to continue to live comfortably long after your passing. 

Aside from concerns about the effects of wealth transfer to familial relationships, there is also the matter of inheritance taxes, which depending on the size of your estate will need particular care and attention to keep it from becoming a problem. Because of these, you should make it a point to start your  financial planning process as early as possible. 

However, before going into the technicalities, you will need to define your goals. Some of the most common objectives include: 

Meaningful Wealth Transfer 

We see it all the time both in movies and in real life. Unfortunately, it’s very common to see financially illiterate heirs squander their family’s fortune in different ways. This is often a result of poor financial planning on the benefactor’s part, especially if they failed to make arrangements or educate their heirs on financial literacy before they pass away.  

Protection From Creditors

Contrary to popular belief, most wealthy families are also in debt, though they may be utilising credit differently from a family who uses their credit line to make ends meet. Whatever the case, one thing is true for both wealthy and poor families: debt does not go away in case of a debtor’s death. It merely passes to the next of kin. Depending on your financial situation, this debt can end up to be greater than the inheritance if not properly settled.  

Limiting Taxes

While inheritance taxes have always been the subject of intense debate, it is nevertheless legally binding. To efficiently manage inheritance taxes, you should plan ahead and figure out the best way to pass on your wealth to your chosen heirs. 

Once you have your goals figured out, you should take a look into these three common ways to transfer wealth. 

1. Annual Gifting

Lump sum gifts are a great way to reduce your inheritance tax liability while also ensuring that your wealth is used responsibly. In 2019, the annual gift tax exclusion was at GBP 3,000, which can rise up to GBP 6,000 if the previous year’s gift was not utilised.

2. Trusts

Trusts are a great way to help your children develop financial responsibility and understand private wealth management, while still allowing them to live comfortably and.The terms of the trust can be set to include a set age of maturity, or life events such as graduation or marriage. Depending on the size of the trust, you may incur a significant sum in inheritance taxes (20 percent on the value exceeding GBP 325,000). Despite tax implications, trusts are a great way to ensure that your heirs are able to utilise your wealth in a controlled manner. 

3. Assets 

If you would rather not transfer cash to your heirs, then you have the option to purchase assets in their name. This ensures that your heirs are not able to squander their inheritance needlessly, and may help assure their future well being by directing the use of your wealth for assets such as a mortgage, or regular payments for university fees. While this can also be done through trusts, utilising wealth transfer in this way ensures that the wealth you leave behind is used only in the way that you directed them for, and cannot be used for any other purpose. 

Conclusion 

As you can see, transferring your wealth to your heirs is far from a straightforward process. To make things a little easier, it’s a good idea to seek the services of a private wealth management firm who will educate you on the different ways that you can leave your wealth behind in a way that will benefit your family and the future generation. 

Harry Robinson Wealth Management is a UK wealth management agency based in Cardiff. We offer services in financial planning, retirement, investments, and many more. Contact us today to book your no obligation financial check!

*Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James's Place and along with Trusts are not regulated by the Financial Conduct Authority.