This article was first published in BL magazine.
COVID-19 has caused many of us to re-evaluate our priorities and focus on planning for the future, both for our businesses and for our personal wealth. Many of us wish to pass on our wealth to the next generation. This is often particularly important in the context of a family business. There’s no magic formula for ensuring that this is done successfully – one cannot anticipate every change, or prevent every intra-familial dispute. There are, though, some sensible steps you can take to maximise the prospects of a successful transfer of wealth.
What do YOU want?
The starting point is to consider what you want to achieve with your wealth. Whilst you may wish to pass future generations something, you might also want to enjoy your wealth yourself! You may have philanthropic causes which are important to you or future plans of your own to finance. It’s only once you have identified your goals that you can set about meeting them.
When to think about it?
It’s wise to reflect on your wealth planning regularly and certainly in advance of any significant life event. One such significant event is a marriage or civil partnership, whether that be your marriage/partnership or that of one of your parents, siblings or children.
The importance of a pre-nup!
Pre-nuptial agreements are a practical way to protect and preserve family wealth in event of a relationship breakdown. These agreements are commonly used where there is a family business, a trust or significant inheritance prospects. A pre-nuptial agreement requires careful drafting and expertise if it’s to stand the best chance of being upheld by a court, so expert advice should be sought.
While not yet legally binding, a pre-nuptial agreement is taken into account by the Court. Parties are expected to be held to their bargain unless the result would be unfair. As such, they represent the best insurance policy to protect wealth where marriage/partnership is in contemplation.
Trustees, not just individuals, need to think about pre-nuptial agreements. Should a beneficiary ought to be required to enter into a pre-nuptial agreement before a wedding or civil partnership? Without a pre-nuptial agreement should that beneficiary be excluded from the trust? Unless the assets of the trust are protected in some way then potentially everything is up for grabs in a subsequent relationship breakdown.
Get the right advice
Most intra-familial disputes we see in our dispute resolution team arise because people did not take proper advice before (and during) taking action.
Before taking an action it’s imperative to be aware of the potential implications, for example how this may impact your tax obligations. It is also essential to understand the relevant legal framework, for example, in Jersey, one does not have complete testamentary freedom over one’s movable estate, and how this impacts upon your assets and your ability to deal with them.
Equally, financial advice is needed to ensure that your wealth is held and managed in a way that best enables you to achieve your current and future plans.
Talk about it
There is a natural reticence to discussing death and money. This has to be overcome. Transparency and involvement in the decision making processes are key. Transparency minimises the potential for misunderstandings and involvement ensures that the intentions behind, and the rationale, are understood, lessening the potential for disagreements.
A will should be an essential part of your future planning and lasting powers of attorney, set while you are in good health, can protect you and ensure your wishes are followed in the event of you not being in so in the future.
It’s very easy to put off dealing with these things. Don’t.
Once you have established your aims, sought advice and discussed matters with those concerned, you need to follow through and take action. Make a Will, settle a trust, if that’s what is advised. Appoint your successors within the family business that will ensure continuity. Don’t put off doing what you want to do with your time and your wealth either.
It’s vital to seek specialist advice as every action, or inaction, has consequences. Don’t leave it too late. Our team at BCR Law has extensive experience in advising clients in relation to wealth preservation, whether that be through a will, a trust or a pre-nuptial agreement.