Stepping up to the challenge of inheritance
How to stay one step ahead with a bequest
3 min read
A bequest invariably generates a mix of feelings: sadness at the loss of a loved one; anticipation of the benefits an inheritance can bring; but also questions about the best way ahead.
For many Adam clients their inheritance can come with a bewildering mix of assets. As well as cash, there is property, family businesses, large estates and other assets and heirlooms that may have been passed down through generations.
Dealing with all of this during a time of sometimes acute emotional distress requires the assistance of a trusted partner. That is where we see our role.
The team at Adam financial planning is highly experienced in helping clients manage complex inheritances. We find that the most successful inheritances manage to mix a respect for tradition with a desire to make their legacy fit for the current times.
Inheriting cash and other liquid assets
If you inherit a substantial portfolio of investment assets, this is a good time to review your investment approach and managers. At Adam we can help by reviewing your investments and advising you on ways to invest which could preserve your long-term wealth over your lifetime, and possibly for future generations of your family.
Money is often passed down in the form of a trust. If this is the case, you’ll need to understand and respect its goals and work with trustees to ensure it can continue to serve its intended purpose.
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The family home
The family home can form a substantial part of many bequests, assuming there is no surviving spouse. By the time you come to inherit it’s likely you will have established a family home of your own, and in these cases the typical response is to sell. Given that the rest of your family may have an emotional stake, it’s a good idea to consult and gain consensus before taking action.
As with other assets, homes can be passed down as part of a trust. These may limit your ability to sell, or come with other strictures, for example gifting a property for the benefit of the community.
For some of our clients, an inheritance comes with a property of historical and architectural value to match its monetary value, and these are often held in trust on the assumption that the heir will move in. However, as changing times have brought changes to how people want to live, we’ve seen a trend away from families moving in to larger houses.
In most cases, the days of Downton Abbey are long gone, and modern family life is likely to focus around the kitchen in a less formal style. Very few modern families employ armies of staff or need the space that comes with a 50-room stately home.
An option that some families are exploring is to move into a smaller house on their estate and open up the main house for weddings and events.
Your role in the family business
A family business has the advantage that you can retain your interest in it while maintaining a fairly hands-off role, deferring to an external CEO or another family member while taking a non-executive place on the board. Of course, as the child of an entrepreneur you may have inherited an entrepreneurial instinct of your own and decide to sell your interest in the family business to pursue your own path.
A number of Adam clients inherit large landed estates that have been in families for generations. These can have added complications of their own, beyond a ‘normal’ family business.
Art and heirlooms
An art collection can define the character of an estate. A collection can be the product of the combined taste and personality of a family going back generations. Many of our clients find that preserving this spirit is an important way of maintaining their family’s identity.
A large art collection can also be important to the culture of the nation. If you want to share a collection with the world beyond your family, HM Revenue and Customs (HMRC) can allow you to do so through the Conditional Exemption Tax Incentive scheme. This scheme will exempt works of art from inheritance tax on the proviso that you:
- look after the item
- make it available for the general public to view
- keep it in the UK
When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.
Tax reliefs referred to are those applying to UK residents under current legislation, which may change. The availability and value of any tax reliefs will depend on your individual circumstances.
Taking on a family legacy can be a big responsibility. As well as wealth in the form of investments or cash, you could find yourself in control of substantial assets such as historic houses, collections of art or heirlooms, a business or land. Finding a way to make your mark while being a custodian for the next generation requires a mix of respect for tradition and an ability to adapt to the times.
About Adam Financial Planning
We help our clients to align their finances to current and future, personal or business needs. We take advantage of current market opportunities spanning tax efficient products or services. As a recognized Corporate Chartered status business, you can have confidence that you are dealing with qualified professional practitioners who provide a high quality of financial planning advice.View more about Financial Planning