One of the best things about the festive season is that it gives you the opportunity to assemble your family in one place.
Whether it’s around the Christmas dinner table, or visits from children, grandchildren, aunts, uncles, nieces and nephews over the festive break, it’s the time of year where you often get to see your loved ones in person.
If you’re looking for a conversation starter with your close family this year, have you thought about discussing your finances?
While many Brits still consider talking about money a taboo subject, there are many benefits to being open and honest about financial issues, and involving your children and other relatives in your conversations. Here’s why.
It can help smooth the transfer of wealth
Figures from FTAdviser show that the value of household wealth relative to the size of the economy has more than doubled since the 1980s. The report also predicted the value of intergenerational transfers will double by 2040.
With billions of pounds of wealth set to pass from parents and grandparents to children and grandchildren over the coming decades, having a plan in place for this transfer is crucial.
If you don’t, your loved ones could face a significant Inheritance Tax (IHT) bill when you die, or your assets might not go to those you would like.
Waiting until you die to pass on your wealth can mean your children receive their inheritance in their 50s or 60s when they may already be retired themselves. It may also mean your estate is subject to a significant IHT bill.
You’ve previously read about the benefits of “giving while living” – transferring wealth earlier on in your life.
Talking about these issues with your adult children and grandchildren can help you understand their priorities, and help you put your assets to good use.
For example, you may discover that they are saving up to buy their first home, and a gift now might help them get over the line as well as potentially reducing the value of your estate for IHT purposes.
It can help ensure your assets pass to the right people
Recent research by Scottish Widows revealed that 69% of adults say they feel responsible for the finances of their children after they have passed, yet more than half (57%) of parents haven’t spoken to their children about their will.
Perhaps more surprisingly, nearly a quarter (24%) of adults haven’t discussed making a will with their partner or spouse.
Without the right will in place, your wealth might pass to the wrong beneficiaries when you die. So, this festive season, chat to those closest to you about your arrangements so they know exactly what to expect.
It can help to manage expectations
In recent years, will disputes have risen. As the value of estates rises, and blended families create more complex relationships, more and more people are contesting wills as they feel they have been unfairly treated. This can lead to irreparable rifts in familial relationships.
One benefit of talking to your family about money is that you can set and manage expectations. Openness and honesty can help the younger generations understand what they might inherit and when, meaning there are no unwanted surprises when you pass away.
4 quick tips for having a financial conversation
If you’re worried about broaching the subject of finances – especially over turkey and sprouts – here are four practical ways to make the conversation easier.
Be prepared
Before you start the conversation, understand what you want to discuss and think about what your outcomes are. You could even review your arrangements in advance so you have all the facts you need at hand.
This means you’ll be able to make your case as effectively as possible and answer any questions that are raised.
Pick the right time
Make sure you agree to talk to your family at a time that suits them. You can then discuss everything without interruptions, ensuring nothing important is left unsaid.
Think about how to start the conversation
Discussing finances can be tricky, so it’s important to think about how to start the conversation. Getting it wrong could result with family members becoming upset or angry – not what you want at this time of year!
One way you could approach it is to refer to a topic that’s been in the news, such as the rising cost of living. This allows you to start off with something that’s generic, which can then lead to a wider discussion.
Keep the discussion constructive
If emotions begin to run high, you might want to consider stopping it. Giving others time to calm down and digest the information can help them to process things.
Get in touch
If you want to create an intergenerational wealth plan, or you’d like to explore including your adult children or grandchildren in your financial plan, get in touch to find out how we can help.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
