Claire Trott, divisional director of retirement and holistic planning at UK wealth manager St. James's Place, outlines how to tackle wealth transfer plans.

Research conducted for St James's Place shows that 41 per cent of UK adults plan to pass on wealth in their lifetimes, yet for many the process of wealth transfer after they die isn’t always straightforward.

The research was carried out by Opinium between 13 and 26 January 2023 for 1,000 UK adults aged between 55 and 85 with £50,000 ($62,000) or more in investable assets.

Dealing with the death of a loved one is an incredibly emotionally time, and managing with the transfer of assets can often be a source of stress and conflict. “There are a number of common issues people face when wealth is transferred after someone has died, and so it’s important to understand how to navigate them and seek advice to help,” Claire Trott, divisional director – retirement and holistric planning at SJP, said. 

Below, Trott outlines how to tackle the most common issues faced in the transfer of wealth when a person dies.

Uncertainty surrounding the division of assets
“Deciding who gets what after your death can be a really difficult decision. However, you should not let such concerns prevent you from making a will. If you are struggling to decide how to best split your assets, you can build a discretionary trust into your will which will pass on the final decision-making responsibilities to trustees appointed by you,” Trott said.

“If there are factors that you would like trustees to consider in allocation of assets, you can leave a letter of wishes, outlining any guidance you may have,” she continued. This can be amended throughout the person's lifetime without requiring the services of a lawyer. However, it is important to note that a letter of wishes is not legally binding. “Whilst trustees should hopefully take your wishes into account, they can act according to their own discretion when determining the final division of assets,” she added.

Young beneficiaries and their ability to manage money responsibly
The age of beneficiaries, and the ability of younger recipients to handle assets responsibly is a common concern in estate planning. “In this scenario, it is possible to set up a trust for the recipient which allows you to leave the funds in the hands of allocated trustees, until the recipient reaches an age at which you think it is appropriate for them to receive the full amount,” she said. “In the meantime, guidance can be left for the trustees to distribute funds on your behalf, for instance, in the form of maintenance and education costs,” she continued.

Vulnerable beneficiaries
“In a situation where a beneficiary is disabled or has a long-term condition requiring someone to take care of them after you die, a discretionary or vulnerable person’s trust can be set up,” Trott said. A vulnerable person’s trust in particular will serve as a tax-efficient tool to ensure that assets are invested in a way that will allow the beneficiary to be looked after for the remainder of their life. “This is something that can also be set up in your lifetime should you wish not to wait until after death,” she added.

Excluding somebody from a will
“It is normal for individuals to have a particular person they do not wish to include in a will and you have complete freedom to specifically write out anyone from your will,” she said.

“However, this does not prevent individuals from making claims against an estate. Indeed, someone could argue that you meant to include them but were badly advised or that you were not in a sufficient mental state when making the will,” she continued. 

“Whilst such cases are unlikely to succeed unless that person had a longstanding financial dependency on you, they can be extremely timely and costly, so it is important to take advice before deciding to remove somebody who is likely to expect to receive inheritance from you,” Trott said.

“It is also important to bear in mind that there is no legally binding contingency controlling who people pass the money to or how they spend their assets after you have transferred it to them.”

Beneficiaries dying before you do
“Unfortunately, situations can arise where an individual’s expected beneficiaries die before they do. Unexpected things happen, and it may be the case that you choose to amend your will or letter of wishes at the time,” she said. 

“Alternatively, you could prepare for this and ensure the gift does not fail, by giving additional instructions in your will, for someone else to inherit if an expected beneficiary dies before you do. This could be the beneficiary’s own children for example,” Trott added.

Not having any descendants to leave an estate to
“Beneficiaries of your will do not need to be your descendants – you can leave assets to whoever you want. People without descendants often choose to leave their wealth to a charity. This has an added bonus of being a tax-free wealth transfer, and if you leave 10 per cent or more to a charity the rate of Inheritance Tax chargeable on your estate will drop from 40 per cent to 36 per cent,” Trott said.

Ensuring that any pets are looked after
“Whilst you can’t leave money directly to a pet, you can leave it to an individual with the guidance that they use it to look after a pet. If you don’t wish to give the money directly to the person looking after the pet, you can set up a trust where your chosen trustees allocate funds to the person responsible for the pet after you die,” Trott concluded.