According to recent research from Barclays Wealth, 40% of the UK’s high net worth individuals do not trust the next generation to protect their inheritance.
Key Findings include:
- 37% of wealthy Britons have experienced family conflict as a result of family wealth
- Earned, as opposed to inherited, wealth is key to financial happiness
- 40% of the UK’s high net worth individuals do not trust their children and stepchildren to protect their inheritance
The report, The Transfer of Trust: Wealth and Succession in a Changing World, is based on a global survey of more than 2,000 high net worth individuals. It provides an in-depth examination of wealthy individuals’ attitudes towards wealth transfer and succession planning, as well as offering insight into what the future holds for the next generation. Interestingly, it reveals how wealth in many cases can act as a double-edged sword, leading to distrust and conflict.
Globally, developed countries display higher levels of uncertainty when it comes to trusting their children and stepchildren to look after their wealth. Respondents in Australia (59%), North America (61%) and Europe (62%) show lower levels of trust in their children and stepchildren when it comes to money management and protecting their inheritance, in comparison to the Middle East (78%), Africa (77%) and Latin America (75%).
Experts featured in the report have partly attributed this lack of trust in the future generation to the changing structure of many UK families. As second and third marriages become more common, this is thought to lead to more complex relationships with both children and stepchildren in relation to wealth and inheritance planning.
David Semaya, Head of UK and Ireland Private Bank, Barclays Wealth, said: “This report provides an in-depth study into the attitudes of high net worth individuals towards succession planning. It is clear that with wealth comes an increasing complexity of choice, and in some cases this can result in concerns about trust and conflict when considering the inter-generational transfer of wealth. Understanding options for succession planning in advance, and seeking professional advice can help address these fears and provide confidence that your wealth will be wisely managed in the future.”
Wealth, happiness and family dynamics
Parents want to pass on their material wealth to their children, as well as a roadmap for a happy life, but the report reveals some interesting paradoxes about inheritance and succession. Source of wealth is seen as a key determinant of financial happiness, with earned wealth much more likely to result in happiness than inherited wealth. However, wealthy respondents in the UK remain committed to passing on their wealth, with 94% of respondents intending to do so.
However, an unfortunate drawback of wealth is its ability to cause conflict – and in the context of succession – family conflict. The report reveals that 37% of wealthy individuals in the UK have had direct experience of family wealth leading to disputes.
Accentuating this conflict, the report reveals that the risk of disinheritance increases in line with wealth for high net worth individuals in the UK. Whilst five per cent of those with wealth levels of between £1m and £2m have disinherited someone or cut a family member out of their wills, this rises to 13% among those with more than £10m.
Catherine Grum, Director, Wealth Advisory, Barclays Wealth, commented: “In the case of wealth that has been inherited, tensions around entitlement may lead to disputes. However, it is surprising just how many wealthy respondents report experiencing such conflict and the impact that source of wealth can have on this, with wealthier respondents more likely to have encountered such conflict.”
Despite all the potential tensions associated with succession and wealth, the report shows that the UK’s high net worth individuals remain committed to passing on their assets to the next generation, with only six per cent of UK respondents believing that this should not be the case. Globally, 60% of respondents say that they require a significant level of professional advice when deciding on an inheritance plan for their children and stepchildren, emphasising the need for expert advice to guide them through this decision-making process.