«You can't take it with you» is a phrase that might come to mind when planning an estate. Yet many wealthy individuals don't have an estate plan or will in place, according to UBS.
In the coming two decades, the world will see the greatest transfer of wealth in history, with $84 trillion passing down to subsequent generations in the US alone, according to the latest Investor Watch from UBS, the world's largest wealth manager.
Around 40 percent of investors globally still have no inheritance plan in place, while half have not shared where the assets or held or have instructions on how the estate should be divided. With so many wealth managers available, it would seem to be a foregone conclusion that more investors would have at least some basic plan in place. But it's complicated.
«While investors overwhelmingly want the inheritance process to go smoothly, inadequate inheritance planning can be costly and could lead to unresolved family conflict,» says Iqbal Khan, President of global wealth management and the EMEAP region at UBS.
Emotional Issue
In a survey of 4,500 investors with at least $1 million of investable assets, UBS found that it can be an emotional issue for them, with two-thirds struggling with how to share the assets fairly among potential heirs.
Some 80 percent give more assets to those heirs they have closer relations with, while others take into account financial needs and how much responsibility they take on in caring for aging benefactors.
Difficult Conversations
One-third of respondents admitted to having unresolved issues and conflicts with other heirs, while around half said one of the biggest challenges was open communication and the fear of appearing selfish. Among those receiving an inheritance, 40 percent said they wished they were more forthcoming with their parents beforehand.
Families with stepchildren add additional complications to the planning. Nearly 90 percent of so-called «blended families» struggle to divide assets fairly compared to 62 percent of non-blended ones, the survey found. Those with no children are likely to leave more money to charitable causes, 40 percent, compared to 30 percent for those with children.
Business Owners
Succession planning is not just limited to individuals but also companies, often the most valuable part of an estate. Around 60 percent say they struggle to divide the business assets fairly, with around half expressing the desire to keep the business in the family. Despite that, they still have neither put a succession plan in place nor set expectations for business transition.
Too Technical
Grassi said that previously he approached the topic too technically, subsequently realizing «that emotions matter a lot,» prompting Credit Suisse to take into account what it means for an individual, who has done nothing else besides running their company, to suddenly hand it over.
«Imagine giving everything up from one day to the next,» Grassi said. Failing to understand the emotional stakes involved, the owner might not be able to sign over the company at the last minute, he added.
One-to-One
It is not just the owner who requires such delicacy. Every member of the board needs to be heard individually even if everything has been agreed upon in meetings beforehand, he said.
«We have experienced that family or board members might be reluctant to express their wishes in front of others,» Grassi said.
The UBS survey found the majority of investors and heirs agree that the best form of action is ongoing and purposeful communication, with the investors expressing an interest to seek professionals to help facilitate wealth transfer discussions.
As the title of the play and film «You Can't Take it With You» reminds us, the message is to best plan for what you leave behind.
