How to speak with your family about inheritance

Money is something that sits in that uncomfortable zone of being a huge part of life and the topic no one wants to discuss outright. A study by the Money and Pensions Service found that just 52% of Brits are comfortable speaking to their family about finances.

Often, when the conversations do happen, it can be in vague terms that make it difficult to determine what the situation truly is. But when it comes to passing money down, having a clear plan and conversation with your loved ones can be vital, and allows both parties to do the planning they need to.

Everyone’s family situation is unique, and you will have the best grasp on your own. If you feel the discussion will be difficult, you can always bring in assistance from professionals. Having a will means that if you are not comfortable having the conversation at all, you can still take account of your assets and ensure they go where you expect them to. However, if inheritance is something you’re comfortable discussing with your family (even if it does feel a bit awkward), it can be extremely helpful.

Here’s a few steps to take that can make the conversation easier.

Establish a plan

There may be a few different goals you are looking to accomplish by informing your beneficiaries about their future inheritance. A simple one that many neglect is taking account of all your assets and knowing where they are. Through your lifetime, you’ve likely gathered a variety of different accounts including pensions, ISAs, deposit accounts, and other material assets like homes or land. Your beneficiaries probably know about the large assets, but smaller accounts are easily forgotten, and the money in them can add up.

Wills often don’t detail all this information, so unless it is recorded or someone else knows about it, the accounts can end up lost. Gretel, a service that finds lost pensions, investment and savings accounts in the UK, estimates that there’s £78 billion in lost assets across the UK. And when assets are transferred it’s an easy time for them to fall through the cracks.  

You may also have a specific intention of what you want to achieve with your accumulated wealth. Perhaps you have children who are looking to buy a home and want to help with the down payment. You’ll need to decide if you plan to gift that money immediately, or if you plan to set up a trust or another vehicle to pass money down at a later point.

If you are presenting this information with a partner, ensuring you are both on the same page about the amount, and how much you plan to be involved, can create a smoother process and ensure the beneficiary isn’t receiving mixed messages.

Come in prepared

Savings come along with a lot of documents. You’ll likely have multiple accounts for your investments, cash savings and pensions, and different ways to access these accounts. Having this information laid out in a way that is easy for your beneficiary to follow can save them a massive amount of stress in the future.

Combining the same type of assets into a single pot could make the process easier in some situations, for example, if you had pensions from multiple employers. You can use AJ Bell’s pension finder to help find any pensions you have lost track of along the way. Many people opt to combine their pensions into a single account to  tie things up more neatly.  

If you’re planning to gift money more immediately, it can be helpful to know where that money is coming from. Will you be liquidating investments or transferring from cash? There are no limits on gifting in the UK as long as the person giving the asset lives for seven years after the transfer. However, if the person passes away within this period, there can be inheritance tax implications for estates that are larger than £325,000.  

Choose the right time and place

Making the topic of the discussion clear beforehand can allow everyone to show up more prepared and in the right mindset, without causing unnecessary worry. A set time is helpful for some, to ensure that this discussion will have an appropriate amount of time instead of trying to fit into a busy schedule. Choosing a moment where everyone can be at ease and mentally present can help the conversation go smoother.

You’ll also want to think about the setting. Many people will prefer to have the conversation in the privacy of their home, where peering eyes and ears won't be privy to sensitive information.  

Starting the conversation

The opening line of money discussions can be tricky. You can use a segue by mentioning that a friend said they discussed money with their children, or even that you read an article (hello!). This can dial down the pressure somewhat. If you’re planning to discuss the assets you have, it might be better to ease your way in gently in than jump straight into the deep end. This can be the first in a series of discussions.  

You might at this stage just let them know where they would need to look if they needed to, instead of disclosing every asset and part of your plan right away. For example, you may have a place that you keep account information they would need to know about in the future. Then, you can fill in piece by piece in the future.  

Leave time for questions

You might think that your beneficiaries have a good idea of what is coming their way in the future. However, a study by asset manager RBC Brewin Dolphin found less than half of children expected to receive any financial help from their parents, while nine of ten parents who had an estate worth over £1 million did plan to pass money down. This could in some ways be seen as a good thing, because it means that your children aren’t relying on that flow of cash. But being given this additional information could allow them to work out a different and potentially more effective plan for their finances.

For example, let’s say you were planning to fund your child’s first house deposit, and know they plan to purchase in a few years. If you're certain that you have the money for this deposit and it is secure, it might be helpful to let them know. They might be able to invest their own money differently given that knowledge, because they now have a longer time horizon than that immediate expense.

Your beneficiaries may have questions around the timing, amount, and way they will be receiving assets. They also may not be sure how to manage them, and what responsibilities they could have. If there’s any questions that you don’t have the answer to immediately, don’t be afraid to let them know that you’ll need to get back to them. It’s better to take time and come with the answer you’re comfortable with than make a rushed response you later feel you need to change.

Remember, the people you are talking to are family. Even when it seems uncomfortable, the more discussions you have, the easier it will become.