Talking about inheritance with parents can be emotionally challenging - but it's essential for ensuring financial stability and clarity for future generations.
An estimated £5.5 trillion of assets is expected to pass from one generation to the next in the UK over the next 20 years or so – that’s according to the probate and estate administration specialists Kings Court Trust.
Known as the Great Wealth Transfer, this unprecedented situation has raised all sorts of questions about how wealth is passed on, and the difficulties of discussing inheritance. Even though these conversations are crucial, many families shy away from them because talking about death and money can be very uncomfortable.
This article offers practical advice on how to start and manage these sensitive conversations, ensuring a better outcome for everyone involved.
44% of people expecting to receive an inheritance are hesitant to open discussions within their family
Why is talking about inheritance so difficult?
Emotional considerations play a significant role in these conversations. Research from the Personal Investment Management & Financial Advice Association (PIMFA) shows that 44% of people expecting to receive an inheritance are hesitant to open discussions within their family because they’re uncomfortable talking about mortality.
But putting aside the sense of fear, sadness and anxiety it might create, there are other challenges in starting a discussion about inheritance:
- Cultural taboos: In many cultures, including the UK, discussing money and death openly is often seen as inappropriate or taboo.
- Lack of knowledge: Many people feel unprepared to have these discussions because they lack the necessary financial knowledge or are unsure of their parents’ wishes.
- Fear of conflict: Worries about causing family disputes or being perceived as greedy can make it difficult to bring up the topic.
Despite this, the benefits of having open and honest conversations about inheritance – and estate planning in general – far outweigh the difficulties. Proper planning helps prevent misunderstandings, reduce stress, and ensures that parents’ financial wishes are respected and carried out efficiently.
Starting the conversation
Creating the right atmosphere is essential for a respectful and productive discussion with your parents. You may also find it helpful to involve other relatives and potential beneficiaries, if appropriate.
Here are some practical tips to help you begin.
- Choose the right time and place: Find a quiet, private setting where everyone involved feels comfortable and safe. Avoid holidays or family gatherings where emotions might already be high.
- Be honest and open: Start the conversation with honesty. Explain why you want to discuss inheritance and what will happen to their estate when they’re no longer around. Emphasise that your goal is to ensure their wishes are respected and that the family is prepared for the future.
- Show empathy: Acknowledge the difficulty of the topic. Show understanding and compassion for their feelings and ask them what their own concerns are.
- Use conversation starters: Sometimes, using external events or media can help initiate the conversation. For example, discussing a recent news story about inheritance issues or mentioning a friend’s experience can be a natural way to bring up the topic.
- Ask open-ended questions: Encourage your parents to share their thoughts and feelings. Questions like “Have you thought about what you want for your estate?” or “What are your main concerns about the future?” can help start the discussion.
- Involve a professional: If the conversation seems too challenging to manage alone, consider involving a financial adviser or estate planner. Professionals can provide neutral ground and expert guidance.
![Father and son](https://d1yv4ntisp48q0.cloudfront.net/wp-content/uploads/2024/07/How-to-raise-the-conversation-of-inheritance-with-your-parents-1214759322-Large-uai-258x172.jpeg)
What to discuss
Ultimately, any conversation about inheritance is just part of a wider conversation about your parents’ wishes – so that’s often a good place to begin.
This type of conversation will naturally touch upon other areas – from wills to funeral arrangements – and the likely need to involve qualified experts (if you haven’t already done so). Here are some of the areas you may find yourself discussing in one way or another.
- Wills and trusts: It’s important to have a valid and up-to-date will to ensure your parents’ wishes are honoured after they pass away. This can sometimes open up conversations about placing assets in trust (a legal arrangement for managing assets – often for tax-related reasons). Both areas should always be approached with the support of a legal professional.
- Power of Attorney: Appointing a Power of Attorney enables others to make financial and health decisions (depending on local laws) on behalf of someone if they are unable to do so themselves. However, it’s surprising how many people don’t have one in place. PIMFA research reveals that only 52% of higher earners who expect to receive an inheritance, have had these discussions with their parents. This figure drops to just 22% for people on lower incomes.
- Living wills and healthcare directives: It is possible to draw up legal documents that specify your parents’ wishes regarding medical treatment and end-of-life care, ensuring their preferences are followed. Having these in place can prevent a lot of uncertainty and stress during difficult times.
- Financial accounts and assets: Making a comprehensive list of all financial accounts, properties, and other assets can save a lot of time and effort down the line, when the time comes. It’s also helpful to document information about any policies that are in place, and where relevant records or paperwork can be found.
- Funeral arrangements: While it may be a tough conversation, discussing funeral arrangements in advance will significantly relieve stress during an already emotional time. Knowing your giving your parents the send-off they wanted can be a great comfort.
- Professional contacts: Make sure you have the contact information for your parents’ financial adviser, solicitor, accountant and any other relevant professionals. Given that 90% of beneficiaries end up using different professional advisers than their parents, it’s important to gather all this information ahead of time.
Proper planning can help minimise tax liabilities, ensuring that more of the estate goes to the intended beneficiaries
The benefits of talking about inheritance
Talking openly with your parents about inheritance and estate planning has some great benefits. Here are five key reasons to start this conversation:
- Clarity and peace of mind: Knowing that their wishes will be respected and that their loved ones are prepared can provide significant peace of mind to parents.
- Prevents conflicts: Clear communication can prevent disputes among heirs, ensuring that everyone understands the parents’ intentions.
- Better financial preparedness: Ensure that beneficiaries are aware of their responsibilities and can plan accordingly. This is especially important if the inheritance includes complex assets like businesses or properties.
- Increased tax efficiency: Proper planning can help minimise tax liabilities, ensuring that more of the estate goes to the intended beneficiaries rather than being lost to taxes.
- Stronger external support: Up to 90% of beneficiaries do not use the same professional advisers as their parents’ financial advisers. By having these conversations early, beneficiaries can build a relationship and trust with the existing advisers, ensuring they feel more comfortable and informed about the financial plans in place.
How can an Amber River financial planner help?
At Amber River, our financial planners understand the complexities and sensitivities involved in inheritance tax planning for families looking to pass on their wealth.
They can work closely with your legal and tax advisers to help guide you and your family through these important conversations with empathy and expertise, ensuring your family’s future is secure and aligned with your wishes.
Get in touch
If you would like to discuss any issues relating to inheritance, arrange an initial appointment with an Amber River financial planner in your area. Call us on 0800 915 0000, or alternatively use our contact form here.
Disclaimer:
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK also have an impact on tax treatment.
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