Inheritance Tax  

How to engage with clients’ beneficiaries

  • List the benefits of engaging with clients’ beneficiaries as part of intergenerational planning.
  • Identify ways to help a client’s executors and beneficiaries during the probate process.
  • Describe the opportunity for taking on beneficiaries as clients.
How to engage with clients’ beneficiaries

Over the next 30 years, an estimated £5.5tn is expected to be passed between generations in the UK, according to a report by Kings Court Trust, called Passing on the pounds.

Financial advisers will have a crucial role to play – advising clients on estate planning, working with their estates and advising the next generation when they receive their inheritance.

The first part of this article considers the benefits of engaging with a client’s beneficiaries early on, as part of the intergenerational planning process, while the second part covers how an adviser can help during the probate process.

Finally, the article will look at the opportunities advisers have to take on beneficiaries as new clients.

Why it makes sense to engage with clients’ beneficiaries early

Many financial advisers do excellent work for a client’s estate after they pass away, even if they have not previously spoken to the solicitor or beneficiaries.

However, it is a big advantage if an adviser has already met a client’s family members and is familiar with their circumstances. Advisers should ideally be familiar with a client’s will and who will benefit.

Better planning outcomes

Building a relationship with a client’s beneficiaries can have a direct and positive impact on planning outcomes.

Estate planning, by its very nature, is done on someone else’s behalf. So while everything will, of course, be done in the client’s interests, it makes sense to build relationships with the next generation if the client plans to leave a legacy.

As an example, consider the following scenario: Your client passes away leaving a wife and son. The son has children of his own to whom he plans to leave a legacy.

Part of your client’s estate is in the form of shares that qualify for business property relief (BPR), a government-approved inheritance tax (IHT) relief. Rather than liquidate them, you arrange for the son to receive his inheritance in the form of these shares. That way he can benefit from succession relief and pass more onto his own children free from IHT.

This planning works by having a relationship with the client’s beneficiaries to the extent of understanding their financial and personal circumstances.

Without that understanding and the adviser’s input, the estate might decide simply to liquidate the shares, meaning the son would have missed out on potential tax benefits.

Important conversations

Research commissioned by Octopus Investments shows the vast majority of people aged over 60 who have children are open to talking to them about their inheritance.

Only 7 per cent say they actually do not want to do so, leaving 93 per cent who do.

However, a lot of people are procrastinating and are yet to actually have these conversations.