Why it’s important to include your adult children in your financial planning conversations

If you already have an established relationship with your financial adviser, have you ever considered introducing them to your adult children?

Your children might already be paving their way in the world, with careers, homes, and families of their own. Or, they could just be starting out in adulthood, perhaps attending university or starting to search for jobs.

No matter where your adult children are in their lives, it’s high time to let them in on your wealth plans. According to Barclays research, the “great wealth transfer” is imminent, with the UK’s young people set to receive more than £5 trillion in inheritance by 2050.

This “great wealth transfer” might remind you that your children will eventually inherit your wealth when you pass away. The question is, are they prepared to take this important next step, and do they have the financial maturity to cope?

Read on to find out five key reasons you should involve your adult children in your financial conversations.

1. If you passed away unexpectedly, your family needs to know how to manage your wealth

Teaching your children about the value of money can be a vital life lesson.

However, money is often seen as a “taboo” subject, so you may have avoided discussing money with your children in the past. Money might not be a “dinner table” conversation in your family, meaning that your adult kids may not have the financial literacy to manage a substantial amount of wealth.

Introducing your adult children to your financial adviser could instil them with the confidence they need to make informed choices in the event of your passing. Without such guidance, in a time of grief, your children could make impulsive financial decisions they later regret.

A financial adviser who knows you as a family can act as a trusted source of wisdom in a difficult time, counselling your children to enact your wishes and assume a responsible role when it comes to your money.

2. Estate planning is easier when you involve the whole family

Bringing your children into the estate planning process as early as possible can give them a core understanding of how to manage their inheritance.

For example, it is important to consider how Inheritance Tax (IHT) could alter the value of your children’s future wealth. Indeed, research published by FTAdviser claims that nearly a third of over-55s have never checked how IHT could affect them.

As you may already know, any wealth above the nil-rate band (NRB) of £325,000, and any property above the residence nil-rate band (RNRB) of £175,000, could be subject to 40% IHT when you pass away.

It is important that your children understand how IHT works, and the ways you are trying to reduce your personal IHT liability before you die.

So, it could be constructive to welcome your children into conversations with your financial adviser about strategies that can help mitigate IHT. For example, you might decide that you could gift money while you are still alive, rather than passing on your entire estate when you die.

Although it might not be pleasant to discuss the eventuality of your death with your children, giving them a basic understanding of IHT and other crucial financial processes could make a huge difference in the future.

3. Being open and honest about money can avoid placing stress on family relationships

Being open with your children about money can help your family avoid difficult disputes down the line.

According to FTAdviser, will disputes are at an all-time high, and have been increasing steadily since 2018.

An unclear or incomplete will can place an immense amount of stress on grieving loved ones. However, if you let them know exactly what to expect in terms of inheritance before you pass away, the subject of money need no longer be the elephant in the room.

Your financial adviser can mediate these healthy financial conversations, helping to maintain the flow of communication between you and your children as you enter later life.

4. Your family business deserves a comprehensive succession plan

If you run a family business, bringing your adult children into your financial conversations is all the more critical.

Having conversations with your adult children about your company’s financial circumstances can help them to understand the importance of what you’ve built. You might wish for one of your children to take on your company, or you may have plans to sell the company once you retire, for example.

Plus, you can hear their side of things, and give them the opportunity to express their own dreams and goals for the family company, in the presence of a financial expert.

Ultimately, your wealth is their wealth, so involving your children in succession planning could bring you valuable peace of mind for the coming years.

5. Aligning your goals as a family can help you achieve them more easily

At the end of the day, your financial goals may be easier to achieve if you share them with those you love most.

For example, if you are approaching retirement and want to help your adult children onto the property ladder, you could be wondering how much you can afford to give away.

Rather than shielding your adult children from your concerns, having frank conversations together with your adviser about how much you can afford, could allow them to understand your position and plan accordingly for their future.

Sitting down with a trusted expert and going through your wealth plans can be a stress-relieving experience, as you can work together to find a viable financial strategy that works for the whole family.

Get in touch

If you want your adult children to improve their financial literacy, or you wish to involve them in your financial goals, get in touch today.

We can help you align your goals as a family, giving you the confidence you need to pass your wealth to the next generation.

Plus, when you do pass away, your adult children’s long-standing relationship with your financial adviser can make for a seamless transfer, giving everyone a smoother transition in a difficult time.

Email info@chancellorfinancial.co.uk, or call 01204 526 846 to speak to an advisor.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.