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Julian Washington on Legacy Planning

This story originally appeared in the March/April 2017 issue of Elite Traveler.

For anyone who has spent a lifetime building their wealth, leaving a legacy for the next generation and beyond is usually part of their ambition. Julian Washington discusses the findings of a recent study.

RBC Wealth Management and Scorpio Partnership surveyed 3,105 high-net-worth people in Canada, the UK and the US to find out just how prepared families are when it comes to inheritance and to learn about their attitudes toward financial education. Our respondents – worth $4.5m on average – included professionals and entrepreneurs, business owners and retirees, and givers and inheritors of wealth.

The results were alarming. We found that there is a remarkable gap between intentions and actions. Those who are passing on their wealth are failing to put effective plans in place, and those receiving an inheritance are doing so without adequate support. So, what should you do?

Put a plan in place

It should come as no surprise that many of those we surveyed said they have limited plans – or not even a basic will – aimed at passing on their wealth to their heirs. Just one in four respondents said they have a full wealth-transfer strategy in place. However, a coherent plan can go a long way toward ensuring that wealth is preserved for future generations.

A lack of preparation reverberates through the generations. More than half of our respondents said they had no guidance on what to do when they received an inheritance. Unsurprisingly, just 30 percent of these people said they had done something to prepare to pass their wealth onto their heirs. The good news is that we found that preparedness levels tend to rise among those who have already experienced the inheritance process themselves, although there is still plenty of room for improvement.

It’s good to talk

One of the easiest ways to make the wealth-transfer process successful for everyone is through regular communication about family wealth. However, we found that people are either not comfortable talking about what they have planned for their wealth, or they simply keep putting it off until it’s too late.

Even when people do overcome their discomfort, their conversation are limited in scope. While 75 percent of high-net-worth inheritors who talk to their benefactors know what they will receive, only 33 percent know how their benefactors want them to use that wealth. When parents have a coherent strategy in place, they feel more confident that the next generation will be capable of preserving family wealth.

Education is essential

At this point, you might be asking how this cycle can be broken. While there is no single solution for everyone, what we do know is that preparation begins at home, and that confidence with money matters is largely dependent on everyone getting an early start with financial education. Unfortunately, we found that most people start too late. On average, structured financial education only begins at age 27. In what other area of life would we wait until 27 before starting meaningful conversations with our children?

The earlier the next generation is educated, the more confident they will be with making sound financial decisions. We know that children are the primary inheritors of wealth – 70 percent are the main beneficiaries of their parents’ wills. Educating our children early translates into increased confidence with financial affairs.

There is no better time to tackle the challenge of wealth preservation. People have greater access to resources, guidance and support than ever before. By improving their financial knowledge, planning the inheritance process, promoting frank discussion and providing more structured learning at an earlier age, parents can better prepare their heirs to manage the family wealth effectively, making an impact for generations to come.

Julian Washington is head of intermediary relationship management, RBC Wealth Management, rbcwealthmanagement.com








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