The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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Starting the conversation: 7 tips to talk about money

4 min read
Olivia West, Private Client Manager09 Jun 2021

Death is one of the few guarantees we get in life and yet it’s a topic that a lot of us don’t want to look directly at. This failure to acknowledge or accept our own mortality can mean that we do not adequately prepare for it.

But, there’s nothing like a modern-day plague to highlight our own impermanence. This and the rising panic about how the government stimulus is going to be paid for has caused much talk about accelerating plans to pass on wealth to younger generations. There are plenty of articles detailing all the granular points you should consider when estate planning. However, a lot of them omit a key ingredient that is essential to making it a success, that is involving those that are due to inherit wealth. If there is a shift towards passing on wealth during your lifetime these conversations become unavoidable, so how are they best approached? At a high level, estate planning considers what you have, what you need and what is left. So before you start giving money away or talking about it, it is essential that you have completed the necessary groundwork to ensure you have enough to last the rest of your life.

The first step is the most simple and that is to take stock of your assets; what do you have and how is it held? Do you have any large liabilities and if so what would happen to these on your death? Do you have any protection such as life assurance or death in service through an employer?

Once you have a clear picture of what you have, the next step is to work out what you need. This might seem like an impossible calculation but most things in life are quantifiable – including care in later life. ‘Which’ have a ‘care cost calculator’ that provides average costs for a residential care home, nursing home and at home care based on your postcode. The importance of these calculations cannot be overestimated, and as with any big financial decision we would urge you to call on the services of professionals such as a financial planner. They can assist with a cash flow plan and discuss not only how much you need, but explore the most efficient way to draw an income. Once you have done the above you should have a clear idea about any shortfalls or excesses. If you have cash or assets ‘to spare’ then comes the time to consider how and where you wish to distribute this.

The following points are a starter for ten when talking to family and/or potential beneficiaries. These conversations should be fruitful whether you are gifting during your lifetime or after. Any conversation around money you put off will still happen after you’ve gone, but without you as an adjudicator.

  1. This doesn’t have to be a formal sit-down meeting with the extended family. These conversations can be cumulative. Break the ice now so that money talk will flow more naturally over time.
  2. Don’t assume financial literacy or idiocy. Explore if there are gaps in financial education and talk about the best way to become more engaged in this area.
  3. Explain your position. Are different beneficiaries going to be treated differently? Are their terms addressed? Equally it may be a relief or surprise to children that they do not need to financially cover long-term care costs.
  4. Take time to understand their position. You may wish to gift to your children, but do they want/ need it? If so, where? House? Pension? If not, can it skip a generation?
  5. Remember these are your assets and wishes. Whilst it is important to discuss these matters in order to prepare your loved ones, you shouldn’t feel pressured or strong-armed into changing them
  6. If your family politics are complicated having a neutral party present in these discussions can help diffuse any emotive reactions. This could be the executor of your will, if they are not a beneficiary, or a professional such as a financial adviser, lawyer or mediator.
  7. If you have real concerns over the maturity of potential beneficiaries, one option is to start small. This could be positioned as a test or an incentive to become better educated on financial matters. Another option is to gift into pensions that have a minimum age limit for access. Trusts are another option, but this could add a layer of cost and administration so try the above first.

Tax rules are subject to change and taxation will vary depending on individual circumstances. This article does not constitute advice or a recommendation; please consult a financial adviser.

You should be aware that the value of investments may go up and down and you may receive back less than you invested originally.

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