Discussing inheritance with parents can be a difficult and sensitive topic, as it may come across as self-interested. However, it is important to plan for the future to ensure the well-being of younger generations and to minimise inheritance tax bills.
In the UK, adult children do not have an automatic right to their parents’ money. Nevertheless, most parents want to preserve their wealth for their children and grandchildren while still being able to enjoy their retirement. This becomes particularly important in cases of second marriages and second families, as well as when adult children may need to take on power of attorney for their older parents.
To manage multi-generational finances effectively, it is recommended to involve the entire family in the planning process. This can help reduce the potential for future disputes and manage expectations. Seeking the assistance of a solicitor or financial adviser experienced in family planning can open up options that may not have been considered and remove some of the emotional elements from the discussions.
When it comes to distributing wealth, being fair to all children does not necessarily mean giving them equal shares. Factors such as financial help given during a parent’s lifetime or one child’s significant contribution to a family business may be taken into consideration. Open communication is key to avoiding misunderstandings, although giving and receiving money can still feel uncomfortable.
Setting up a lasting power of attorney (LPA) is a legal document that allows one or more people, known as “attorneys,” to make decisions on behalf of an individual who cannot do so themselves. There are two types of LPA, one for health and welfare and another for property and financial affairs. It is advisable to consider setting up an LPA at any time after the age of 18, as part of general estate planning.
In cases where a parent refuses to attend a medical appointment, it can be a tricky situation. While individuals have capacity, they can still make unwise decisions. Seeking advice from social services is recommended, as they have legal responsibility for individuals with eligible needs. If necessary, social services can refer the person for medical treatment or even force them to undergo treatment if deemed necessary.
Power of attorney can be abused in certain situations, particularly with vulnerable clients. Legal guidance, such as a vulnerable client policy, can help professionals make decisions in the best interests of their clients. Lawyers may need to record conversations, have longer meetings, and use notes to ensure that suggestions are reviewed properly.
Managing money in situations involving second families and remarriage can be complex. In the UK, adult children do not have an automatic right to inherit their parents’ money, unlike in other countries such as France. However, there may be instances where adult children were informally promised money and could potentially make a claim against a parent’s estate. Mediation is common in such cases. While individuals are free to dispose of their estate as they see fit, the courts have limited power to intervene under the Inheritance Act 1975 if there is a failure to make reasonable financial provision for certain individuals linked to the deceased.
Setting up a trust can be a solution to protect family money and ensure that adult children receive their inheritance. Trusts are not just for the wealthy and can be used with life insurance policies to avoid estate inclusion for inheritance tax purposes. They can also offer inheritance tax advantages. There are different types of trusts, such as life interest trusts and discretionary trusts, that can help avoid disputes and provide control over who benefits from the assets.
In conclusion, discussing inheritance with parents can be challenging, but planning for the future is crucial. Involving the whole family, seeking professional advice, and considering the use of trusts can help manage multi-generational finances effectively while still allowing parents to enjoy their retirement.
