How to Protect your Family Wealth Through the Generations

Protecting your Families Wealth

If there’s wealth in the family, it needs to be protected at all costs with the help of an experienced estate planning expert. Without good practical foresight and carefully managed investments, money can be lost, spent or invested badly. With this in mind, we spoke to Nick Hughes, an experienced wealth manager, tax planner and specialist in non-dom services, about how to hold onto family wealth through the generations.

Why Do Family Fortunes Disappear?

To start with, let’s take a look at why some family fortunes disappear. Many factors can come into play but there are several key things that need to be considered.

Firstly, Inheritance Tax can deplete funds quickly. Anything above the £325,000 estate threshold will be taxed at a rate of 40% upon death, which is why estate planning is vital (more on this later). Secondly, later generations may not have the same flair or drive as their ancestors. With a lack of knowledge and passion for business or investment, income can soon dry up.

How to Manage Family Wealth

Managing family wealth isn’t easy. But here are some of the best ways to hold onto it.

  • Embrace Estate Planning

Hughes recommends reducing your Inheritance Tax liability by giving money or assets away while you’re still alive. This will reduce the value of your estate, thereby saving on tax payments. You’ll also be able to see the joy it brings to your loved ones, and keep your hard earned cash in the family. Kent tax advisors can help you to plan effectively, utilising trusts or other tax saving measures where necessary.

  • Think About the Future of Your Business

When it comes to lucrative family businesses, says Hughes, owners need to decide whether they want to sell up and hold onto family funds or put plans in place to facilitate the long-term future success of the company. Selling the business requires a clever exit strategy to ensure maximum wealth is extracted, while keeping the company going requires careful thought. Options include:

  • Keeping it in the Family

If you plan to keep the business in the family, make sure everyone is on board and has the knowledge and expertise needed to take the company to new heights. Leaving your business in the wrong hands could be disastrous and have a big impact on family wealth.

  • Reorganisation

Sometimes family members don’t wish to keep the business going, or might not have the right skills to make it a success. In this case, it’s important to secure an experienced team while considering the wealth of your family. While making family members shareholders is one option, you might also want to extract some wealth from the business before handing it over.

Hughes notes that shares in a company will often qualify for Business Property Relief (BPR) where the property is a trading company. This can mean there are no Inheritance Tax charges on those shares after death. Unused sale proceeds, on the other hand, will be subject to tax on death. A Kent accountant for probate services will be able to help further when an owner passes away.

Get your affairs in order today to help project family wealth through the generations.

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