How to protect women's wealth from shady characters

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How to protect women's wealth from shady characters

Proper family wealth planning can go a long way towards protecting your clients' hard-earned wealth and ensuring they can pass it onto future generations, if that is their wish.

But why can it be so tricky to do later-life planning, especially for 'deprived daughters'?

And how can advisers help their clients set their financial house in order, whether their clients are male and female?

Ben Mason, chief executive of Kinherit, spoke to FTAdviser In Focus about why it is important to protect wealth and assets across generations - especially to prevent women from being left out-of-pocket thanks to "some idiot".

FTAdviser: You've done a presentation recently called Deprived Daughters and Disinherited Dukes. What was the motivation behind that - and are daughters really deprived or dukes really disinherited?

Ben Mason: Not with the proper advice and end of life planning in place. The title of the presentation was inspired by some of the most common dilemmas that clients come to us with - protecting their wealth and assets across generations and ensuring that their final wishes are carried out without undue delay.

I have a daughter myself and frankly I’m terrified at the prospect of her meeting some idiot when I’m gone and having him take off with half of what we leave her.

If you want to protect your wealth beyond your own death, trusts are your best friend.

At the same time, you rarely hear of destitute dukes, because families of substance have understood for hundreds of years that the clever use of trusts can shield their beneficiaries from punitive tax bills on death and allow for a consistent handover to the next generation.

FTA: End-of-life finances seem to confuse so many people, not just women. Are we really all a bit lackadaisical when it comes to setting our financial house in order?

BM: It is a society ‘thing’. While many people will happily spend 30 minutes reading a review for a new restaurant, or 20 minutes watching clips of 'The Voice; Portugal' they do not want to think about death, so keep putting it off. Lackadaisical? Maybe. Head in the sand? Definitely.

Proper end of life planning shouldn’t be something to be scared of; actually it can give great peace of mind.

It will look at the legal, financial and practical realities of death, the cost (time and effort) is minimal compared to the reassurance in life, the help on death and potentially the protection for generations to come. 

FTA: What are the dangers of not tackling inheritance planning properly before it's too late?

BM: Death can be a tough subject to tackle and often people are turning to put their affairs in order late in life. However, death or incapacitation can happen at any time, and developing a good system early on can bring wider benefits.

For example, our Kinvault is designed to help customers organise and securely store the right information for their situation, in a way that can be safely passed on to an attorney (on incapacitation under a lasting power of attorney) or executor (on death), so you can be assured that you’re making things as easy as possible for those you leave.

We’re in an increasingly digital age, and with thousands of financial institutions it is simply not practical to expect an executor to write to every single one in case you had taken out an online savings account or similar.

And even if a paper copy of a life policy or share certificate is stored in a shoebox or a filing cabinet, isn’t it better the executor is told where to look? 

FTA: How can advisers help guide client conversations to these often difficult topics?

BM: Kinherit and IFAs share a common goal - to provide best advice and best service to clients. We are very granular in terms of the instructions we take, so that we don't just produce a comprehensive will but also have the permission to notify and coordinate with executors, the family and the deceased’s IFA (if there is one).

This allows the IFA to play the vital role of providing continuity of advice and support, and perhaps where young children are involved it gives further peace of mind that their children have the right professional advice from the outset.

FTA: The harsh reality is people, especially women, are finding it difficult to access advice on their needs - how can we help close the gap and ensure more people do not end up with families hit by IHT or family disputes? 

BM: We need to end the perception that professional end of life planning is only for the 1 per cent who have assets or businesses or complex families.

Death has far-reaching consequences, and everyone’s situation is unique. And given all your wealth goes through it, isn’t it worth spending time? But the good news is that end of life planning is now accessible.

So whether you just want to specify a guardian for your kids, or say what would happen to your pets, or who you want at your funeral - make sure you also put a power of attorney in place (...just in case) and list your assets (to avoid them getting lost) and lay out a basic handover plan. 

There is an added challenge for people who want to put a will in place, because the industry is not regulated, and the people writing wills are often more interested in upselling products than getting the will right. 

Certainly this is reflected in our experience reviewing wills written by third parties, with more than 50 per cent [of the ones we've seen] containing serious legal errors (up to and including a testator who had himself as his own beneficiary). 

There is an added challenge for people who want to put a will in place, because the industry is not regulated.

And whether this leads to mere consternation, or all the way up to legal contestation, the prospects of having any recourse to the solicitor or will-writer who drafted the will are minimal (not least because the testator has deceased).

Whatever your wealth, to ensure good advice, you need a STEP-qualified will-writer to walk through your unique situation and ensure you get the best advice. After that, it is your choice what you want to happen, and how your wishes get presented. Technology can also be a powerful weapon here. 

FTA: Evidently, there's no silver bullet - it obviously requires a lot of time in planning - but what good rules of thumb are there for clients needing a starting point for intergenerational wealth planning?

BM: It is hard to generalise, as everyone’s situation is unique, but there is a general concept of “get your death planning done first, before you look at lifetime planning”. And if you want to protect your wealth beyond your own death, trusts are your best friend.

To give some real world examples:

  • Trusts allow you to pass your assets to your children, and protect that wealth from them losing it in a divorce. 
  • Trusts allow you to pass your business on to your family, and their family.
  • Trusts allow you to ensure your assets can be managed responsibly for the benefit of your family. 

That said, trust law is extremely complex, and structuring trusts that do not accidentally trigger extra costs is an advanced science.

However, a well-crafted trust will protect all existing exemptions (including the Residential Nil Rate Band - something many professional quality trusts do not do, costing testator families up to 40 per cent of £175,000 or £70,000 in tax), will be flexible to changes in circumstances, and minimal effort and cost when there is nothing to do (which can be most of the time).

Professional trustees will also know to avoid accidentally triggering tax reporting, and will more generally help ensure that families are supported in their legal obligations.