Wealth planning in an uncertain world

Insight bites: Wealth planning in an uncertain world

Seismic economic shifts in the UK and globally are driving a renewed focus on maintaining the value of capital and assets for the high-net-worth community.

A broader focus on wealth protection

As part of a new survey, it was revealed that, in 2022, 63% of HNW families across the UK experienced a decrease in their disposable wealth throughout 2022, losing an average of £5,796 from their spending ability compared with the previous year.

“We have seen first-hand a new rush for creating Wills and delegating the breakdown of estates. Financial pressure is causing many to take stock and think about whether their assets are structured in the best way, leading to a surge in more tax-efficient Wills and estate planning.”

“For clients who are concerned both with dissemination of personal wealth and their capital assets, we are now seeing more comprehensive estate planning, covering the entirety of estates and how they are disseminated. This is to ensure there can be no question over their wishes for all of their assets, both personal and professional.”
Alexandra Milton, Partner

Securing the inheritance of the next generation is a big driver for wealth protection concerns among HNW individuals. In fact, according to our respondents, the two biggest financial fears were dying without a Will in place to secure estates and end of life wishes (17%) and general concern about protecting the wealth of future generations (15%).

Building a framework for the future

Protecting wealth for future generations has also come into increased focus since the pandemic, with 41% of HNW individuals more likely to write a Will following the crisis. More than half (54%) said this is the first time they have considered putting any legal document in place to protect their wealth.

Their intentions to engage a solicitor was also higher, with 39% already in discussion and 44% planning to seek advice. Adding to this, new demographics are exploring wealth protection.

““The demographics of those focusing on wealth protection has also become far more diverse in terms of age and profession, with more people recognising the importance of having plans in place as soon as possible.

“This proactive approach is spurring on the creation of long-term relationships between lawyers and families, creating a sense of legacy and a return to the concept of having a family lawyer.”
Alexandra Milton, Partner

However, despite the increase in the appetite to put Wills in place, there is notably less appetite and awareness when it comes to securing estates in the event of serious illness or inability to manage your own affairs.

A surprising seven in 10 of our HNW responders admit to not having a lasting power of attorney (LPA) agreement in place, leaving the execution of their estates vulnerable should they enter final stages of their life without a trusted party to oversee their affairs.

“Lasting Powers of Attorney are unfortunately an area that many individuals either lack knowledge about or consider to be a secondary concern to making a will. While awareness and planning for getting an LPA is on the rise, more often than not they are still seen as a late-stage preparation to make.”

“In instances where an individual’s health is waning, they will often rush to make arrangements for an LPA, thinking that can be prepared and registered quickly. The reality, however, is that LPAs can take several months to put into place, often still being worked on as a client’s health deteriorates.”
Scott Taylor, Partner

While there was an encouraging 26% increase in the first half of 2022 for LPA registrations, there likely still remains a large gap of individuals who may be unaware or have not thoroughly considered the benefits that an LPA can offer them.

Ensuring the best outcomes for families

Inheritance tax (IHT) is a consideration that comes into play for many HNW individuals when they organise their estate. More than a third (34%) of our responders said that the value of their estate meant that IHT would be owed. We asked our responders what steps they have taken, if any, to avoid paying the tax. Charitable donations were the most common approach here, cited by almost one in five (40%), followed by tax-efficient investments such as trusts (35%) and gifting money to family members while still alive.

“Whatever your age or circumstances, it’s essential to have all the necessary preparations completed in advance so that there can be no question of who you want to carry out your wishes, ensuring you are cared for and that arguments between family members or friends are settled before they can happen.”
Alexandra Milton, Partner