Open heir: why families need to talk honestly about wealth transfer

UBS global survey finds millions of investors do not have a clear plan to pass their fortune on to the next generation

Open heir: why families need to talk honestly about wealth transfer
Steve Randall

Some people hate to talk about money. They consider wealth to be a toxic subject and one that can cause conflict.

They might be right, but that doesn’t erase the importance of those with money having open and honest conversations with their heirs about how/if the wealth transfer will take place.

A new global survey from UBS has found that around 40% of investors do not have a formal inheritance plan, mostly because of the complexity of dividing their wealth among intended beneficiaries.

Half of respondents said that they have not even shared information about what assets they hold, where they are, or how much they are worth.

The challenge of estate planning is intensified if there is not to be an equal split with two thirds of the wealthy investors polled finding dividing their wealth fairly a challenge. Those with a blended family are more likely to find it hard to divide assets fairly.

However, 80% of respondents said they will leave larger shares of their fortune to those who they have a closer relationship with, although the financial needs of heirs is also considered.

Business owners face additional challenges, as it can be a difficult asset to pass on and while almost half intend to leave the business to family, many have no estate plan and have not discussed their intentions with heirs or set expectations about business transition plans.

UBS’s latest Investor Watch report polled more than 4,500 investors worldwide with at least US$1 million in investible assets.

“While investors overwhelmingly want the inheritance process to go smoothly, inadequate inheritance planning can be costly and could lead to unresolved family conflict,” said Iqbal Khan, president Global Wealth Management and President Europe, Middle East, and Africa at UBS. “Every family has different values and should be supported by a team of professionals who can help them develop a personalized strategy to preserve what is most important to them.”

Family conflict

The conversation about inheritance was cited as a challenge by many heirs.

Adding to the difficulties, family conflicts are widespread (one third admitted to having unresolved disputes with heirs) and almost half of heirs felt that talking about what they may inherit appears selfish.

But 4 in 10 of those who have inherited said they wish they had been more open with their parents beforehand and almost two thirds said carrying out the wishes of their parents or other relatives was difficult.

Overall, both investors and their heirs believe that ongoing and purposeful communication is the key to managing wealth transfer, with many saying it is made easier by engaging a professional to help.