Majority of high net worth individuals (HNWIs) in the UK do not have a plan in place for how they will pass their assets on to the next generation or for inheriting wealth, according to a research by RBC Wealth Management carried out in association with Scorpio Partnership.
The study, which surveyed high net worth individuals from the UK, Canada and the US, revealed that only less than one quarter of Britons are prepared for transferring wealth while 30% said that they are unprepared.
The unpreparedness continued through generations, with only 35% of respondents found to have discussed their wealth transfer plans with their parents or benefactors before inheriting assets.
However, Britons were also found to be the most proactive in case of improving their financial literacy, with 64% of Britons showcasing this trait. In comparison, 55% of respondents in the US and 52% in Canada had this trait.
Also, over half of Britons (53%) said that they have started to educate their children on wealth planning, while 14% of Britons said they have no plans to do so at all.
Britons were also found to be the most open to lifetime wealth transfer, with 35% planning to do so as compared to 30% in Canada and 25% in the US. Also, 55% of UK respondents said that they plan to transfer their entire wealth upon death.
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The study also found high net worth individuals more likely to have a wealth transfer plan if they themselves have received an inheritance. Overall, 32% of those who have inherited wealth said that they have a full strategy, while 58% said that they have a will.
Lack of planning was found to be more pronounced among those who have not yet inherited, with 17% having a full wealth transfer strategy and 47% having a will. The study also found that parents having a wealth transfer plan are more confident of their children’s capability of preserving family wealth.
RBC Wealth Management – International sales and relationship management head Tony Johnson said: “US$4 trillion of wealth is expected to pass to the next generation over the coming years. Yet inheritors are being left in the dark by their parents or other benefactors, leaving them at risk of being underprepared to protect and grow that wealth for future generations.
“There is a cycle of unpreparedness in wealth transfer that needs to be broken. Family discussions around estate and succession planning can be daunting, meaning they are often put off until it’s too late, which may result in damaging consequences. Open conversations, financial education for heirs, and advance planning are therefore critical to protecting the future of estates and assets that UK families have built.”