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How individuals can ensure efficient intergenerational transfer of wealth
Community Coordinator

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Every parent dreams of creating financial freedom for their children and to provide a better life for them. A life free of any financial burden sets the foundation for even future prosperity. Parents strive to leave their children a financial legacy that will provide for intergenerational wealth.

 

However, without proper planning, the inheritance you leave behind could dissolve rather than providing your children and grandchildren with a solid financial future. There are as many considerations around intergenerational wealth planning as there are solutions.

 

At Standard Bank Wealth Management, we work closely with our clients and their families to ensure their legacy wishes are met. To help your family prepare to inherit your wealth a few things need to be considered.

  

Firstly, professional advice is key in considering the appropriate structure, relevant to the circumstances of each family and it’s important to never take a general approach.

 

When thinking of how to protect one’s assets when moving from one generation to another the focus should the protection of beneficiaries from unintended consequences. The transfer should be practical and not a burden to heirs/beneficiaries. The appropriate structure attention should be given to ensure there is sufficient provision for heirs and/or beneficiaries of trusts to provide for future income and capital requirements of heirs and/or dependants (insufficient provision will result in the sale of potential growth assets).

 

Secondly, sufficient liquidity to fund taxes (CGT, Income Tax, transfer duty) and professional fees for example executor fees should be factored in. Other considerations depending on each families’ circumstances may involve business continuity - a major consideration for families with operating companies.  Lastly, appropriate structures for the purpose of leaving a legacy for Philanthropic purposes require professional advice.

 

Much like all things there are bound to be a few obstacles and potential pitfalls. Clients should be mindful of restrictive will provisions clauses in a last will and testament and trust deeds. Outdated or inflexible structures may not stand the test of time and regulatory changes may lead to the unintended consequences the family never planned on. Often the lack of liquidity to fund expenses, taxes or support heirs requires assets to be sold and unfavourable prices achieved. Tax mitigation and planning is important but should not be the sole purposes for planning.

 

There are numerous acts that impact and influence wealth planning to name a few but not limited to:

 

Estate Duty | Transfer duty | Administration of Estates Act | Exchange control | Maintenance (children and surviving spouse) | Long term Insurance Act

 

Every family is unique and therefore no single method would apply in all situations. However, part of the planning process is to ensure the next generation is equipped to receive the wealth, appreciate its value and make smart investment choices.