Will it cause squabbles?
Most families want to leave a legacy to their loved ones. What they rarely consider, however, is that children and extended relatives might squabble over their estate.
According to the Centre for Economics & Business Research, generational wealth will increase from £69bn to £115bn in the next 10 years while £5.5 trillion will pass between generations in the next 30 years.
It is therefore pretty important to ensure that all this wealth goes to the people or organisations that we want it to and isn’t locked away pending complex legal battles for assets where intentions have not been made clear.
At Magenta, we are aware of many families that have been torn apart by money squabbles after loved ones have died without leaving a Will, or where a Will was out of date or apparently “unfair.”
The following 3 stories illustrate the problems:
- David found himself in the middle of a family feud when his mother passed away a decade ago. Despite the existence of a will that divided the assets of her estate equally, in-fighting began soon after her death.
David’s older brother had signing authority over one of her bank accounts containing a sizable amount of money. After her death and encouraged by his wife, he withdrew the money. It caused a lot of bad feelings within the family and the rift continues to this day, with some family members refusing to speak to others. David is upset that his parents would be devastated if they knew what had happened.
- Sylvia is one of 3 siblings. She runs a successful business and lives about an hour away from her elderly parents. Her older sister lives in the same village as their parents and is always popping in to see if they are all right. She has two small children and she and her husband work in the poorly paid care sector. Her brother lives overseas and is very wealthy.
Sylvia knows that her parents Will states that the 3 siblings will receive an equal share of their estate, but she doesn’t think this is fair as it doesn’t take account of the individual circumstances of the 3 children. Sylvia thinks her sister should receive a larger share and her brother a smaller share, based on their respective contribution to helping their parents. She is keen to have this conversation with her parents but is uncomfortable about raising the issue because she knows her brother will disagree and this will cause bad family feeling during her parent’s lifetime.
- Jennifer is 86 and was widowed 3 years ago. Her 2 children Simon and Alison live locally and initially provided a lot of support. Alison is married to John and is generally regarded as “the bossy one” in the family. She was keen to get her mother’s affairs organised so that her estate could be settled quickly when she died.
Jennifer and her late husband had given £40,000 to Simon some years ago to start his own business. When John heard about this, he took Jennifer to see a solicitor and insisted that this gift be reflected in her will so that when she dies, Simon will get £40 000 (plus interest!) less than Alison.
Jennifer felt bullied about this, especially as Alison and John are much wealthier than Simon. So, she returned to the solicitor without telling Alison and John and changed the Will back to a 50/50 split, at the same time removing Alison as Executor and writing a detailed letter of wishes explaining her actions and thoughts on the matter. Jennifer is still in excellent health, but we don’t have much hope for harmonious sibling relations when she passes away!
Get professional help
The good news is that keeping the peace among heirs is possible through proper planning, effective communication and transparency. It is the legal part, however, that can trip up even the most sophisticated and organised people. Many families discover too late that a parent’s will is deficient in key areas.
There is a fallacy that anyone can draft a will, but especially in the case of complex estate or family circumstances, we really need the advice of professionals. There is not an area of law, accounting or financial planning where there are shortcuts that people can take in exchange for paying for good advice.
For wealthy individuals, whose assets might include homes, businesses, art, jewellery, vehicles and other valuable items, drafting and regularly updating a will is essential.
One key, and often overlooked, consideration when drafting a Will – particularly when the estate is sizable – is differentiating between fairness and equity in the division of assets. This is where conflicts tend to arise between children, leading to costly and stressful litigation.
Fairness v equity
Why is this? In many cases, benefactors will look to divide assets equally among their children. Nevertheless, their offspring might argue that because one sibling was once given money to help with a deposit on a home, for example, or to start a business, they should be given a smaller share of the final estate.
This problem is exacerbated as baby-boomers are now living longer and may require care, often provided by one of their children. In cases like this, there can be a tendency for a client later in life to amend a Will and leave more to the primary caregiver, leaving the rest of the family to go apoplectic after that family member has died.
Talk about it!
Conversations with family about our intentions is crucial. Even if we enjoy a good relationship with our parents, children, grandchildren and siblings, our experience is that everyone deals with money and life differently and so we should not assume that all members of the family will think the same and accept our decisions with equanimity.
We should also bear in mind, the considerable influence of non-family partners, who may not share our values and may become divisive if they feel their interests have been overlooked.
Legal documents
Using a professional to draft an effective will, lasting power of attorney or power of attorney and using a professional for probate can help to alleviate many of the issues that may be faced when a client dies, particularly if the estate is complex and inheritance tax (IHT) reliefs need to be claimed.
Many now realise, for example, how complex the residence nil rate band can be, and there are going to be estates that will pay – and some that already have paid – IHT unnecessarily. HMRC is not going to remind a lay executor that the reliefs are available. Families are then sometimes forced to decide which assets to sell, and that can set the stage for even more arguments.
A client may think they can trust the will and the estate plan they have left behind, but what happens if someone else steps in? Using a professional at all stages ensures a will is correctly drafted, the estate administration is dealt with efficiently and the client has peace of mind.
A will is like an insurance policy that will pay out on death in the way that we want our assets to be distributed. We should get into the habit of reviewing our wills regularly as we would an insurance plan, to ensure that it reflects our current wishes. Bear in mind that as our family circumstances change over time, we may want to change the terms of our will to ensure fairness.
We also suggest that a comprehensive letter of wishes is written to accompany our will so that when we are no longer around to answer the questions, everyone can be clear about why we made certain decisions. This alone will serve to preserve family harmony and avoid unnecessary squabbling and bad feeling.
Magenta can help by referring you to a suitable specialist for writing wills, lasting powers of attorney and probate. Magenta have also designed the Magenta Manual that can help to document your current and future wishes to share with your family when you are ready. Do call if you would like a copy for you or for other family members.