We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Training the next generation is vital to protecting your
family's wealth for the long term
Family wealth brings great advantages but also great challenges.
Perhaps the most significant of these is ensuring the younger
generation is well prepared to take the helm when the time
comes.
Running a landed estate or taking over a family business is a
huge responsibility, and the education process is likely to take at
least a decade – many would say a lifetime. With life
expectancy increasing, and many older people keeping control of
their wealth until well into their 80s and 90s, children and
grandchildren face a long apprenticeship before they are in a
position to take up the reins themselves. Handling the process
constructively is key if younger members of the family are to learn
a responsible attitude to financial management.
Groundwork can begin early in life. In their teens, youngsters
will become aware that they enjoy a lifestyle most others do not,
and this is a natural moment to initiate general discussions about
money. Most teenagers can grasp the distinction between capital
assets and income, for example, and should begin to appreciate that
although the family may have a large house and valuable paintings,
this does not necessarily translate into disposable cash.
There is no need to disclose financial information to under-18s
if you do not wish to do so. This changes at the age of 18, when
children become legally responsible and consequently are required
to sign their own tax returns, and can hold investments in their
own right. Most wealthy individuals would, however, agree it's
not a good idea to give your 18-year-old Ł10m. If youngsters
know a generous allowance and eventually a large inheritance are
coming their way, it can be a powerful disincentive to bother with
exams or career aspirations.
Instead, parents may opt to begin a gradual and structured
introduction to the family wealth from their children's early
20s, or when they graduate from university. Involvement and
training can be scaled up until their early 30s, by which point
they are likely to have a clearer career path and may have bought
their own property.
Some measures you might want to consider include:
Involving younger members in family
meetings
As children turn 18 and begin to ask more probing questions,
consider inviting them to part of the family meeting. Your adviser
will be able to help you decide which elements are appropriate. The
aim is to provide insight into certain aspects of the family estate
or business, and introduce youngsters to key members of your
team.
Building skills
It's generally sensible to encourage children and
grandchildren to undertake some professional or vocational training
and find employment rather than relying on an allowance.
Transferable skills from the wider commercial world can be of huge
benefit to the future success of the estate or family business.
"The only downside is that if the younger generation chart
their own path and become successful in their own right, they can
lose their emotional connection with the estate, so if the house is
sold off and becomes a hotel they don't care" says Jerry
Barnes, partner and head of private client tax services at Smith
& Williamson's Bristol office. "Going and doing their
own thing is generally a good move, provided they keep in close
touch."
Even if they stay within the family fold, 20-somethings can do
'work experience' in different divisions or geographies to
build their awareness and skills.
Delegating responsibility
No one wants their children to be sheltered to the point where
they become financially incompetent. To develop their confidence
and abilities, they may need to be given some autonomy. Many
families allocate their younger members a budget or pot of money
with a specific task attached, such as a building or renovation
scheme, a farming venture or a philanthropic project – they
will learn a huge amount, within safe and structured
parameters.
"We find this approach helps them find their own
direction," says Rohan Armes, investment partner at Smith
& Williamson. "As well as getting fulfillment, they will
feel more included at family meetings if they have something to
report on." Foundations and charity work can also provide a
useful reminder that others are less fortunate.
Education is a lifelong journey, with the ultimate goal a smooth
handover from one generation to the next. A good adviser will be
with you every step of the way, helping you financially manage the
nature and pace of your children's development.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In his Budget Speech presented on the 8 June 2017, the Prime Minister of Mauritius unveiled a three year Strategic Plan to support the Government's medium-term and long-term objectives.
This briefing covers both (i) a refresh of the general position under Jersey legislation and a consideration of the previous case law relating to management and control of Jersey companies and ...
Investing trust property can be a challenging business for trustees – their obligations are many and onerous, the standards they will be measured against are high, and the consequences of failure severe.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Business Matters Edition 28: NP Estates (Video)
