Intergenerational planning is more than just tax talk

Questions abound about its fairness, complexity and its impact on the economy. Is it time for reform? Should it be abolished altogether? It is important for advisers to have an understanding of this debate. 

It is more important, however, to take a step back from the tax itself and to reframe the debate to make it meaningful for your clients.

Taxes come in many forms, they change and evolve with the political season, but the big questions you ask around financial planning should not.

Questions like, 'where do you want everything you have worked for to go when you die?' 'Who is best placed to manage your estate?' 'How comfortable would you feel leaving money to a spouse who then remarries and may have another family?' 'Is blood more important than anything else when leaving a legacy?' 'Should you be able to change your mind easily?' 'Are you weaponising your money into the future with the decisions you make today?' 

Leaving a legacy

Let’s start by separating intergenerational planning and inheritance planning, which are two different things. When we think of intergenerational planning, we are referring to why and how a client would pass their legacy on to other people, whether that is wealth, knowledge, items or experiences.

People tend to frame intergenerational planning in terms of the wealth a parent passes on to their child, but that is a restrictive definition. In fact, it is all about a transfer of someone’s legacy to another person, charity, trust or some other form of entity. 

For most clients, it is difficult to think of a world where they no longer exist. That is why the art of the adviser is to help clients understand that what they do at the end of their lives with their legacy will affect the way people remember them for many years afterwards.

This illustrates the problem that comes when advisers help clients plan for what happens after their death.

Intergenerational planning is situational and time-dependent, and requires very careful emotional support to be done properly.

More often than not, people try to play out the things that they wish they had done in life. So, the biggest question we should be asking when discussing intergenerational planning is: what would you like to do while you are alive? 

If we do not have those conversations while a client is alive, then we have no way of knowing how their legacy is going to be received after death.

It is not just the money; it is what comes with it and the stories people tell themselves about why that person made the decisions they did.