The current climate has caused many of us to pause and reflect, which in turn has resulted in a surge of interest in estate and succession planning. Could this potentially be one of the small positives that is emerging from this global health threat? With most people in a more open, caring and receptive frame of mind, now is an excellent time for all generations to come together and discuss what is often a challenging issue.
Taking a holistic approach to legacy and future prosperity
Above all else, it's crucial not to lose sight of the fact that legacy is about far more than financial wealth: it's also about looking to ensure the happiness and prosperity of your loved ones in a broader sense, for years to come.
Having open and constructive conversations as a family can benefit the senior generation and allow children and grandchildren to forge their own paths – potentially at a tangent from the family business or even completely separate from it.
If they are philanthropically minded, the discussion might be about setting up a trust or foundation in the family name, that they can run in the future.
If, on the other hand, they have an entrepreneurial streak and want to start a business, it may be a case of providing practical advice along with seed capital. Either way, the key to any of these scenarios is honesty and open-minded conversations; and to have them as early as possible.
Articulating your values to the next generation
Discussing your wishes with your family will allow you to communicate your values, which will form an important part of the legacy you leave. This can be extremely helpful for the next generation, not only on an emotional level but on a practical one as well.
"It's easy for the next generation to make assumptions if they aren't privy to all the necessary information," says Alan Beattie, Global Head of Private Wealth Solutions at HSBC Private Banking.
"For example, children often feel that they should keep a business in the family, even when their skills and motivations lie elsewhere. Or they may shy away from trying to innovate or diversify in the belief that this would show disregard for the legacy of their forebearers."
Even if you pass on wealth with no caveats and conditions, without a clear and unequivocal understanding of what their benefactor would have wanted and the legacy they wish to leave behind, heirs can be averse to taking even mild risks with their inheritance.
"On a personal level, those who inherit are often inhibited by a feeling that money, and especially assets such as property, are not really 'theirs'," explains Alan.
Communication is a key element to a family successfully navigating difficult times. We advise clients who are senior members of a family to think about taking this opportunity to have productive conversations, passing on what you have learned to others. If you are a younger member of a family, or are likely to inherit wealth, be ready to listen and use the time to expand your knowledge on the matters you are likely to encounter in later life.
The same philosophy applies to the more tangible aspects of estate and legacy planning, such as creating Wills. In fact, in the US more than 40 per cent of adults have no written Will. In the UK that figure rises to 60 per cent, while in China the percentage of the country's 220 million senior citizens who have not written a Will is estimated to be as high as 99 per cent1.
There are plenty of reasons for avoiding this discussion, not least because it is uncomfortable. We may also convince ourselves that rising life expectancy, 21st century medicine, private healthcare, and a life free from danger make us almost invincible.
"It may be tempting to postpone critical decisions but having difficult conversations sooner rather than later is always preferable," says Alan. "Doing so will increase transparency, improve understandings and facilitate harmony."
Even if you have prepared a Will, discussing it with your heirs is still a valuable exercise in itself, as Alan emphasises.
"Discussing wishes and plans will help bring legal documents to life and give them the full sense of purpose, legacy and values associated with your wealth," he explains.
What's more, discussing your wishes with your loved ones provides an invaluable opportunity to talk about the value of wealth, how to manage it appropriately and who they can trust to advise them. Often this helps to set minds at rest on both sides.
HSBC Private Banking has been supporting the world's most influential families with wealth transition and succession planning for generations. Our international presence helps us to deliver solutions that can be tailored to your specific requirements, as well as meet the needs of international families.
We offer a full range of services including trusts, wealth planning, estate planning, philanthropic advisory, family governance and family office advisory; all to assist business families in sustaining their success.
Please contact your Relationship Manager and start your conversation today.