Transferring wealth: Customising a plan for modern families and the next generation

You don’t have to look far to see that much has changed in recent decades, as the world has steadily become more globalised, prosperous and complicated.

Along with new-found wealth, social attitudes have shifted too. This can present challenges for high-net-worth families who want to transfer assets to their heirs.

How to address conflicting values

Sometimes, there needs to be a truly customised approach to wealth transfer. This happened when one RBC Wealth Management client, a woman in her early 60s, wanted to give her three daughters in their 20s and 30s, a gift of £3.5 million each.

After the accounts were established, the mother decided to get her children more involved in the investing process. Although the trio had scant investment management knowledge, they still had firm views about which investments were not acceptable, at least for them. Specifically, they didn’t want to own arms companies, oil drillers or pharmaceutical firms, as they didn’t fit with their moral values.

“It was important for the daughters to get that point across at the first meeting, which is probably quite typical of that generation,” says Paul Canas, associate director of Relationship Management at RBC Wealth Management in the British Isles.

Bold plans can help create a lasting legacy

While many high-net-worth individuals worry solely about transferring wealth to the next generation, some have bolder ambitions. One RBC client, of significant wealth, wanted to make sure the family legacy lasted for centuries. “They have amassed so much wealth they are developing a 200-year plan,” says Chris Matthews, managing director of Relationship Management at RBC Wealth Management in the British Isles. “It was really striking. You wouldn’t have had that conversation 15 years ago.”

These are just two examples of what has become an increasingly common theme with high-net-worth individuals. “Wealth transfer is probably the biggest thing we’re having discussions over,” says Lloyd Maxwell, director of Relationship Management at RBC Wealth Management in the British Isles. “Typically, the ‘wealth makers’ of the families are now in their late 50s and early 60s, and many don’t kick off conversations about wealth transfer until later in life. As professionals, we try to encourage these conversations sooner rather than later.”

However, these conversations are often far from straightforward. “Due to changes in family dynamics and differing generational values, navigating these conversations can be challenging,” says Maxwell.

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Changes in social attitudes

One social change affecting wealth transfer is the levels of divorce and remarriage. Although divorce levels have dropped in recent years, 42 percent of couples married in 1995 were divorced by their 25th wedding anniversary in 2020, with close to 37 percent ending in divorce after 20 years, according the Office for National Statistics.

This means that second spouses, stepchildren and sprawling family trees are a common feature in today’s society.

At the same time, younger generations approach life from a different perspective than their parents or grandparents. Socially responsible investment is a growing trend as investors look to give their wealth a greater purpose. And as companies continue to innovate and strive for positive impacts, sustainable and responsible investing opportunities continue to increase.

This new landscape not only presents potential for intergenerational friction, but it also complicates how high-net-worth families pass on their legacy to their children or grandchildren.

Do you have a will?

One key to managing the transfer of wealth is to gain a deep understanding of what the key stakeholders desire. A smart way to kick off that discovery process is by having a conversation about a client’s will.

“More often than you’d think, high-net-worth individuals don’t have a will, or it has not been kept up to date,” Matthews says. “Human beings don’t like thinking about dying.”

It might be uncomfortable, but it’s a necessary conversation because what’s written in the will should address what happens to the wealth after that person’s death. “The will is central to planning,” Matthews says. “It answers the question of who do you want to receive wealth and how much of it. In other words, that document provides a foundation for all other aspects of wealth planning. That’s normally the piece that unlocks the other planning options.”

Having these discussions early also helps avoid the uncomfortable moment of first discussing money with a beneficiary soon after the death of a loved one.

Start the conversation with family as soon as possible

Discussing the transfer of wealth to loved ones at an early stage can help younger generations to prepare for their inheritance. Indeed, RBC Wealth Management’s 2023 UK survey of 600 high-net-worth individuals found that 81 percent of respondents aged 25–34 wanted guidance about the responsibility and emotion of having wealth.¹

“There is a great deal of emotional pressure from inheriting significant wealth,” says Matthews. “Heirs and beneficiaries can feel overwhelmed by the responsibility of having wealth, and even a sense of shame and guilt, so these conversations should act as a primer to help them prepare.”

Extended family members should also be a part of conversations as early as possible. That’s a shift from the past where typically, plans would be made solely with the head of a household or wealth creator.

“It’s increasingly important to have those discussions with other family members,” Canas says. “They have ideas that may be different from those of the parents.”

Those discussions help to inform everything about the distinct needs of the heirs as well as the benefactor. What may become clear is that different people have varying needs.

How to tackle multiple priorities of an estate

The rise in property prices over the last two decades means high-net-worth parents now frequently assist children with the purchase of a first home. “I see lots of parents helping kids get on the property ladder, as the next generation doesn’t yet have that level of wealth,” says Maxwell. This help can sometimes come in the form of a loan guarantee or as a gift.

Another estate planning tool is a prenuptial agreement. This can limit a spouse’s claim on marital assets and help protect the family legacy.

Aspirations of individual family members also play into the wealth transfer process. Many millennials, those born between 1980-2000, are keen to start businesses, particularly in the technology sector. “Funding those entrepreneurial pursuits can help them on their path and can create wealth,” Canas says. “These are opportunities that weren’t necessarily available to generations past.”

Wealth transfer doesn’t have to be a challenge. With open communication channels between generations and experienced professional advisors, a wealth plan can be put in place that grows and flexes with a family’s evolving needs.

¹ Survey conducted by Kantar on behalf of RBC Wealth Management in October 2023. Respondents consisted of 600 high-net-worth individuals (minimum investable assets of £500,000) based in the UK.

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