With the intergenerational wealth transfer officially underway, Malcolm Gee, Equity Trustees national manager of estate management, has argued that advisers need to be getting ahead of inheritance conversations in order to help their clients maximise the opportunity.
“Advisers are often involved only at the end of the administration, once their client is about to receive their entitlement from an estate and as such advisers don’t always understand the opportunities that may be available to their client,” Gee told ifa.
With this in mind, Gee said that, if possible, having the inheritor’s adviser looped into the discussion early on is best as this gives them the opportunity to work with the executor of the will and thus more time to develop an effective strategy for when they receive the assets.
“As advisers are not normally in communication with the executor, they don’t get to understand the time frames that estates can take to administer. There are often complex assets, difficult family dynamics and significant tax implications for getting the estate management wrong,” he said.
“Some opportunities that advisers may not be aware of is the ability to take a transfer of estate assets such as shares, managed funds or property rather than having all assets within the estate sold and only having cash distributed.
“This can create opportunities to reduce tax payable and ultimately result in an increased inheritance.”
The adviser being included early on also gives them the opportunity to help the client decide how they would like to receive the inherited assets in order to deliver the greatest outcome for their financial goals.
“Furthermore, where a well-drafted will provides the opportunity to establish a testamentary trust, it is important advisers discuss this option and the potential benefits of the trust with the beneficiary before the beneficiary advises the executor how they would like to receive their distribution,” Gee said.
“The executor will work with beneficiaries in order to distribute the estate in line with the will but it is important the beneficiaries are able to make a well-informed decision, ideally as a result of advice from their adviser.”
Speaking with ifa last month, PlanningSolo founder Jordan Vaka explained that the topic of inheritance can often be tricky for advisers, particularly when they are working with both the parents and the child who expects to inherit assets.
“If you’ve got a younger client who has part of their retirement financial plan – I think we’ve all come across this – is the expectation of an inheritance. So, they want you to build a financial plan around that expectation,” Vaka said.
“But then you’ve also got the parents, and they are fully intending to spend the inheritance and there’ll be nothing left. That’s a really kind of tricky spot to find yourself in.”
When it comes to conversations regarding inheritance, Vaka suggested that holding a “family meeting” can be of value as it allows each party to get on the same page with assistance from the adviser acting as a kind of mediator.
