The all important family money chat

In our planning meetings, we are encouraging our clients to do one thing. Have the family money chat.

As the son or daughter, it is important that you ask your parents whether their financial affairs are properly organised. In my experience, it’s better to know early doors whether your parents have made provisions for themselves and that their intentions when they die are left in the appropriate documents. This means that they have up to date and easily accessible wills, lasting power of attorneys, a completed Essential Plan and Guardian Plan.  

A good place to start could be to ask if they need your help with anything. You are not asking for money, you are not asking to be nosey, you are just asking to check. If you don’t, you could be in for a nasty surprise. No one wants to find out too late that their parents didn’t sort lasting power of attorney or didn’t make a will, both of which will cause significant issues at a time when you least need it.

It is also well worth being sure that they do not leave a large inheritance tax bill due on the estate because they did not undertake any legacy planning. This can be especially challenging as IHT will need to be paid in full in the six months after probate is granted.

Conversely, I also encourage clients who are parents to have talk to their family about their wealth – it shouldn’t just be down to the kids to bring this up.

More often than not, the parents I speak to have already done a lot financially (and emotionally!) for their children. And, in my opinion it’s important that they now live the life they want and have a sustainable income to fund this lifestyle in a non-working world.

But this doesn’t mean that there aren’t opportunities to start gifting monies earlier to reduce the burden of IHT. This can easily be arranged using the annual exemptions on a regular basis, such gifting out of income or one off gifts for weddings, property deposits or even helping with a business idea or setting up a foundation.

There are some of you who may not want to gift at all and take the view that IHT is not your problem. Everyone is entitled to the view, after all it’s your money. But what’s important is that you are clear on what is and isn’t possible, to know that you can gift monies without it impacting your income stream or asset base if you want to and if you don’t, that your family know your position. That’s why it’s good to talk.