We often hear people say:
“I’ve been meaning to do something about that but just haven’t got around to it yet.”
“I’d rather concentrate on the now.”
“Maybe can we leave that discussion for another day?”
However, at some point, ‘The Day’ will arrive, and if proper planning and documentation is not in place, life becomes much harder. It’s the type of thing that can break a family and destroy a successful business.
Nobody is immortal, and we don’t know when our time will be up or when life can change drastically. It’s not only death that needs to be planned for, in fact incapacity can sometimes be worse, as everyone is stuck in limbo and if all power vests with the incapacitated patriarch or matriarch, there is little those around them can do to keep the wheels turning.
In my whole career I don’t believe I have ever met a client who has everything in place, and frighteningly many have nothing at all. Millions in the bank, properties and luxury assets everywhere, but no proper planning for what should happen when they are no longer around.
This may sound like the voice of doom, but it’s reality. By not listening to the wake up call, you could be subjecting your family, your employees and business partners to a very uncertain future. Here’s another truth; thinking about it doesn’t make it happen. So let’s cut through the superstitions and protect the fortune you worked so hard to make.
To give some context here we can cite some cases where no planning was in place and also when improper planning was used.
The first case has been anonymised:
Mr Jones, a young British real estate developer living in the EU died suddenly after he accidently fell down a flight of stairs. The cause of the fall was later attributed to the fact he had suffered a huge aneurism, and the need for a second post mortem delayed and made matters more stressful. He was a highly successful individual with a young family who were dependent upon him. His business was profitable, but also highly leveraged, and he was part way through a property renovation for his own home. There was no formal planning in place. Immediately after his untimely demise, his wife had no access to money as their personal bank accounts were all jointly held, and upon the death of Mr Jones the bank froze their accounts until the probate process was complete. But there was one set of accounts they didn’t freeze – which happened to be linked to their large personal mortgage as well as business loans. Unable to settle the monthly payments, all assets were under threat. She was unable to even withdraw cash or use their bank cards, meaning she couldn’t even buy groceries. Living in a highly bureaucratic country without the correct paperwork and unfamiliar inheritance laws made this devastating event even worse. The business caved, and to cap it all, eventually their young children inherited most of the estate leaving her with only a tiny proportion, which was never her husband’s intention. Sale of any joint assets would continually require a court order until the children turned 18.
Mr Jones fell into the trap of leaving estate planning until another day. He also fell into the second trap that many expats do, whereby they assume the laws of their own nation will apply to inheritance. Many get a nasty shock when they realise most European nations have forced inheritance laws.
The second example is the recent and well-publicised case of the dispute over the validity of Aretha’s Franklins two wills. In the end it was upheld that a later, hand written, will trumped an earlier formally documented set of wishes. Whilst this might be a victory for one side of the family, in reality it is a loss for all. The fallout from the dispute and the legal battle that entailed will be felt by both sides of the family for many years and is likely to have caused irreparable damage. This scenario could have been avoided by earlier discussions and formally rejecting the first will. It would have saved a lot of time, money and, more importantly, anguish.
Early thoughts, discussions and appropriate documentation are vital. It isn’t easy, and we also understand that with multi-generational family businesses, this can be difficult as it can be with various branches of a family created through divorce. But this makes it all the more important to address it. Your thoughts should cover personal and business succession planning (the latter we will cover in more detail in a separate article). Identifying early on who could be the next CEO, who has the business acumen and is respected by the employees is vital. It may be that certain family members are better suited than others, or in fact a non-family member may be appropriate, but identifying and coaching early is important, as well as making those around you know what is the plan.
We have also mentioned incapacity, and when looking at the succession planning stage it is important to cover this angle as well. Some countries have legal provision for this but not many, you need a Power of Attorney that covers financial affairs as well as health care. It is also a good time to look at how business financials work, what signatories are required for certain payments- if one key signatory was to fall ill could you still make essential payments? A business can easily collapse if it can’t pay its debtors in a timely manner.
Legal impediments – Think how you would like to leave your wealth and then check this is possible. It may sound outrageous, but you can’t always leave your wealth to whomever you wish to. For example, in certain European countries, you cannot disinherit your children, in Australia you can’t leave money to your pets, and often digital assets are not provided for under law. There are solutions to this, such as the creation of trusts and the updating of marriage contracts – solutions can often be found, but any consequences need to be thought through.
Unintended consequences – Once you have ascertained what limitations are in place, think what impact leaving your wealth in a certain way could have. For example, if your children inherit a large amount of money immediately, would this be in their best interests? You could create a trust whereby they receive certain proportions of their allocated wealth upon certain age milestones or educational or career levels. Similarly, there are those UHNWIs who proudly state they will leave their children nothing. Whilst you are entitled to do so, if you have brought your children up with extreme wealth, to suddenly no longer have this could have social and psychological impacts you never considered. Similarly, leaving more to one than another, or allocating positions in the family business, could lead to feuds you had not anticipated. Therefore where possible it is important not only to plan but to discuss and prepare your family for the future.
Marital breakups – If the patriarch or matriarch has already been party to one or more divorces you should make sure wealth passes as you wish, and this may not be to an ex-partner. Checking what they are entitled to, and then planning appropriately, is key. Equally you may wish that they receive something, but if your will doesn’t state so they may not receive anything. Should you stand under a community of assets regime, and you marry your second partner who also has children, upon your demise they may inherit your wealth, which could then pass to their children from a previous marriage as opposed to your children from your first marriage. Unexpectedly you have disinherited your own bloodline through ignorance of the law.
Geography – Many families live multi-jurisdictional lives. Therefore you need to make sure that even if you have had some planning it is still valid for the jurisdictions that you find yourselves in. What works in the UK isn’t necessarily valid in the EU or the USA. This applies not only to wills but also to pre-nups and other agreements you may have in place. Secondly, think about where your beneficiaries are based, some countries impose inheritance taxes on immediate family members whilst others do not, this can add up, and it may be that you are better allocating funds in a will trust.
Guardianship – If you have young children, think who you would like to bring them up in your absence and what your wishes would be. This is an important discussion, and making financial provision for this is also key. Education can be expensive, therefore think about insurance policies you may need to take out to ensure that those you nominate as guardians have the financial resources available. Talking to family members is also key here, as well as documenting it. You don’t want your family fighting over guardianship, for example a bitter custody battle raged over six year old Eitan Biran whose immediate family were killed in a cable car crash in Piedmont, Italy in 2021. This saw the boy taken from Italy to Israel against legal orders, which then sparked an on-going kidnap investigation.
Your partner should be ‘on board’ with what could happen. Let’s also not forget there are cases when it is impossible to determine who has passed away first, and as such whose will kicks in first if they are not the same. This could mean assets being distributed to family members you never intended as in the Scarle case in 2016 in England, whereby dispute over which parent died first led to the disinheritance of one side of the family.
However, some people might say ‘why do I care? I will be dead.’ For some that sentiment may be true, and why waste time thinking up scenarios and feuds that may never happen? However, if you care enough about your family and friends, as well as your business empire, when you are living, surely providing for them and making life as simple as possible at the time of greatest stress and upset could be the greatest gift of all.
First of all, we listen.
We work with you to determine how best to cover your assets and ensure your wishes are respected. It can be a difficult topic to tackle, and being able to talk it through with someone who is impartial can help you crystalise your thoughts. It is also a good opportunity to run through your list of assets and their locations, as this is vital to ensure that planning is appropriately documented. It can also help in other ways, as you may discover that some additional insurance is required, or a more efficient way of working is identified, which can lead to more immediate benefits for clients.
Our team is made up of senior advisors who are used to discussing such issues in an empathetic and knowledgeable way. We assist clients with discussions they may have with family members or business partners, ensuring buy-in and agreement with the proposed succession plans. We coordinate with the appropriate legal providers to ensure that your wishes are enshrined in formal documentation. Importantly, as you continue your journey with us, we work with you to ensure that your planning remains relevant throughout your lifetime.
Please contact us to find out more about how we can help you…Don’t leave it for ‘another day’.