It is a little-known fact that creating generational wealth starts with protecting what you already have, your assets and your children.
Did you know that the value of your assets can be significantly reduced when they are inherited by your children and loved ones if you die without making a Will?
Here’s how:
If you have been fortunate enough to acquire assets during your lifetime (e.g. purchase a property or properties, accumulate savings, run a profitable business), the law decides who will inherit your property, money and possessions when you die should you fail to make a Will.
Take the example of “Kofi”, who died before getting round to making his Will. Kofi was divorced and had two children from his one and only marriage. He owned property and money in the UK and land in Ghana. It was well known that Kofi wanted his children to inherit everything he owned as he did everything with them in mind. Kofi was also in a relationship at the time of his death.
In the absence of a Will, Kofi’s children were equally entitled to his estate by law. However, Kofi’s partner instructed lawyers to make a claim against his estate, she felt that she was entitled to a substantial part of it.
After several years of disputes and negotiation, Kofi’s children finally agreed to a financial settlement with his partner. Kofi’s estate in Ghana followed a similar path and it was several years later before it too was settled.
As Kofi died without making a Will, his children received less wealth than it was believed he intended; their inheritance was significantly reduced by legal fees and the financial settlements paid to his partner. Kofi’s children also had to wait years before they could inherit his money and subsequently, the value of their inheritance was eroded by inflation.
If Kofi had made a Will and received legal advice, he would have protected his children’s inheritance thus creating greater generational wealth. Much, if not all, of the problems faced by Kofi’s estate could have been avoided.
Kofi’s story is a common one. These stories frequently occur because of widely held beliefs that making a Will should only be done when a person is elderly or sick. In many cultures, as a Will is related to the subject of death, making it at any other time can be considered taboo.
Such thinking can have disastrous consequences for loved ones and destroy or harm any intentions a person may have had for generational wealth. Kofi’s story is a perfect example of this.
Here are 3 things you can do to create Generational Wealth.
- Make a Will. This ensures your hard-earned assets are inherited by your children and the people you love. It will avoid the government choosing your beneficiaries or the wrong people getting their hands on your wealth, like Kofi’s partner did. You can also appoint legal guardians if you have minor children.
- Make Lasting Powers of Attorney (LPAs). If you become mentally incapable, your family (including your spouse or civil partner) would not have automatic authority to deal with your finances and health. They would need to apply to Court to request this authority which would be a long, expensive process. These expenses and subsequent ongoing fees could reduce the value of your estate over time and affect the amount of money your children inherit. However, when you make an LPA, you choose who gets to make decisions for you, without the same expense and time delay.
- Receive Tax Planning Advice. This would typically apply if your estate were currently taxable or if you are a high net worth individual. The advice would set out your tax planning options to ensure your wealth is transferred efficiently, so that as much of it as possible is retained for the benefit of your children or by your estate when you pass away, rather than handed to the taxman.
