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David Jupp of Quilter Cheviot Investment Management looks at the question of how best to ensure a smooth transition of an estate from one generation to the next.
A landowner’s natural wish is to pass on their estate to the next generation, but this has to be balanced against the demands of land management, which span the generations. So, how to pass on the estate in the most sustainable and tax-efficient manner possible?
The importance of planning cannot be overstated. A smooth transition from one generation to another is the best way of keeping an estate intact for future generations, while also maintaining good family relations. In our experience as a firm that handles succession issues, this is best achieved with open and frank discussions, which ensure transparency, manage expectations and promote peace of mind.
In these matters, there is no ‘one size fits all’ solution but many common concerns and mistakes, so it can help to bring in an independent expert to help the discussions.
succession
One of the most delicate issues is how to treat all children equally while ensuring that the estate is not broken up. At Quilter Cheviot, we work hand in hand with other experts such as financial advisers, lawyers and estate agents to ensure that the income from the estate is maximised and secured for the future generations. We don’t give financial advice but we are specialists in running portfolios for growth, income in retirement and capital to leave to the next generation. And with the new pension freedoms, it is now easier to pass down sizeable pension pots to family members at death.
Robert Paul, Partner in the Land Management department of Strutt & Parker’s Shrewsbury office, says: “We’ve worked with clients to plan for the future by diversifying the income streams of their estates; for example by selling off non-core property without substantially affecting capital income, letting commercial units, or by converting buildings. Where this is done effectively, and estates are well-managed, the returns can outstrip those of assets in any other property class. In addition, the tax reliefs that apply to agricultural land can mean that, in some cases, it is possible for property to pass from one generation to the next without any inheritance liability.”
Once you have made a decision, explain your reasons for it, and make sure the inheritor actually wants to take over. It is best not to make assumptions, as you may be surprised. If you have to give someone bad news, discuss it with them – if people know what to expect, they can come to terms with it and family disagreements can be managed. Another common mistake is not allowing the younger generation to take an active, decision-making role in the management of the estate. Giving up control can be hard, but if your inheritors don’t feel trusted, they may become frustrated.
Quilter Cheviot has extensive experience of managing wealth over many generations and we know what works. Thinking long-term, being realistic about returns and leveraging wealth in sensible, sustainable ways are all key to ensuring wealth can pass from one generation to the next.
Succession planning is not easy, but one that is definitely best tackled head on to avoid further problems down the line. That is why we have partnered with Strutt & Parker, who put together a Succession Guide for you. Please call David Jupp, Executive Director on 0121 710 3821, or email
marketing@quiltercheviot.com to receive a copy.
Investors should remember that the value of investments, and the income from them, can go down as well as up. Investors may not recover what they
invest.Past perfor mance is no guarantee of future results.
Any mention of a specific security should not be interpreted as a solicitation to buy or sell a specific security.
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David Jupp, Executive Director
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