Almost half of the ultra-rich haven’t figured out how to pass on their wealth, research finds

Only 41% of investors with over $1 million have a plan for passing on their wealth to future generations, UBS says.

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Some $84 trillion is expected to be passed from one generation to the next within the next 20 years. And that’s just in the United States.

But 41% of those currently holding onto this cash do not have a plan for how they’ll pass on their wealth to younger generations, according to a report from UBS.

While the 4,500 investors from 14 regions, who each have over $1 million worth of assets, surveyed by the Swiss bank might be thinking about how to divide their money and investments, in many cases there isn’t a concrete plan.

“Even after the harsh realities of the pandemic, many investors simply aren’t taking the actions necessary to ensure successful wealth transfer,” the research dated Oct. 19 found.

However, this doesn’t mean investors aren’t concerned about the process: 76% of them have thought about whether there will be issues when they transfer their assets, 71% are aiming to minimize taxes on the inheritance they will leave, and 70% have questioned if future generations will use the assets wisely.

On top of the lack of plans around passing on wealth, half of the surveyed investors haven’t had conversations about how wealthy they really are, how their assets are invested or how they will be split up.

Fairness is a key concern

The reasons for this vary. Sixty-six percent of investors said they were concerned about fairness for example. Not all of them are planning to split their wealth equally, the report found.

“Benefactors who have resolved to favor some heirs over others are clear about why: 80% will give more to heirs with whom they have closer relationships. Others cite heirs’ financial needs and their role in caregiving,” it said.

Family structures, for example when step-children are involved, further complicate the situation – 87% of investors involved in such a scenario said fairness worried them.

Inadequate inheritance planning can be costly and could lead to unresolved family conflict

Iqbal Khan

President of UBS GWM, President of UBS EMEA

Over half of investors just don’t see these conversations as urgent, 46% avoid the topic of money within the family and 49% are worried about making their children or grandchildren feel entitled.

Among those who are set to inherit wealth, skipping the conversation about money was the main reason for not knowing much about family wealth plans.

“It’s touchy to ask, ‘Hey, what’s going to happen with your money when you die?’ We shy away from having those conversations,” one person cited in the report explained.

The lack of planning could cause long-term problems

Avoiding the topic could however cause longer-term problems, said Iqbal Khan, the president of UBS’ Global Wealth Management division and its Europe, Middle East, and Africa region.

“While investors overwhelmingly want the inheritance process to go smoothly, inadequate inheritance planning can be costly and could lead to unresolved family conflict,” he commented.

Forty percent of those who inherited assets regretted not having conversations about wealth with their family beforehand, the research found. A third of them reported conflicts with siblings or other family members about how to split up the money or about questions like “who gets the house?”

There is a solution though. The survey found that both those giving and those inheriting assets are keen to open conversations and create a more formal plan about investments moving from one generation to the next.

Sophie Tremblay

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