The gift of responsibility: Understanding the importance of wealth planning after receiving family money

By Kim Hinds | 04 Apr, 2023

The gifting of family wealth is something that is always warmly appreciated. When your family decides to pass on something that they have worked hard to build, it can change your life and secure your financial future. Making the most of this act of generosity through managing it responsibly is the perfect way to show your gratitude. This is a blessing that always comes with a certain level of responsibility.

 Everyone who receives a significant financial gift from their family should ask themselves how they want to utilise it. There will likely be positive lifestyle benefits that come with enhanced wealth such as more freedom, better property and an increased sense of financial stability, but thinking more widely about how you want to deploy your gift is essential. Proper planning can increase your sense of control and allow you to more effectively manage what could be a significant period of change in your life.

 It is also important to take the feelings and motivations of the people gifting you the wealth into account. Family harmony could be at risk if you get this wrong. While the wealth is now yours, the people who spent their life building it up will want to see it used responsibly. Sitting down and discussing how they would like you to proceed is a good way of making sure you don’t upset them with your choices.

Have the funds been gifted for a specific reason like a business venture or with the aim of funding education for your children? Would the people gifting the wealth like any of it to be used for charitable donations? Getting answers to these questions and others early will reduce the chances of the newly acquired wealth becoming a source of conflict.

How much will this change your life?

Another important factor to consider when receiving the gift of family wealth is your current financial situation. Receiving the gift when you are already wealthy in your own right is very different to receiving it when you are not. If you are already wealthy, the likelihood is that you will have a good grasp of how to deal responsibly with the additional wealth. But if the gift means that you find yourself newly wealthy, the risk of managing it poorly could be higher.

Taking time to think about your priorities and educating yourself on the key issues around wealth management will be time well spent. Investing is central to any robust wealth management strategy and getting to grips with the basics will prove to be useful. An experienced wealth adviser can talk you through the pros and cons of holding cash, investing in equities versus bonds or the nuances of building a property portfolio. Cashflow modelling is an essential tool for anyone with wealth to manage, allowing you to map out your income and expenditure and take stock of any assets and debt. You can then create a forecast for your financial future which will help you manage your funds.

 The gifting of family wealth can occur anytime during someone’s life. Considering how old you are when you receive a gift can inform your choices. The priorities of someone in their twenties are naturally likely to be different to a person in their sixties. Younger people with their lives mostly ahead of them will need to take a longer-term view of how to preserve their wealth over time. What can seem like a large gift can be eroded swiftly without proper management and advice. People in their later years may be less concerned about supporting themselves financially, but be focused instead on passing on the wealth to their own family at some point. In this case, an awareness of inheritance laws and ensuring that you have an up-to-date will could take precedence.

Borderless wealth challenges

Gifting within international families can take on an added layer of complexity and it is important to think these issues through. US families living in London, for example, need to be aware of which jurisdiction the gifting takes place in. Differing tax regimes apply in different countries and the recipient will be impacted depending on which one is relevant. Considering the citizenship of both the giver and receiver before moving ahead with any gifting is also sensible.

Receiving family money can lead to a variety of emotions. It’s important to take a step back and think carefully about how it impacts an individual’s financial circumstances and ascertain what the objective of the new wealth is. We can then devise a plan together to help achieve that. says Kim Hinds, Executive Director at London & Capital and an adviser to international families passing on wealth to their children.

At London & Capital, we believe in the importance of a family legacy and see a well-managed transfer of wealth as key to achieving that aim. Our advisers can help you ensure the preservation of wealth across the generations so that you and your family flourish.

To get in contact with London & Capital, please give us a call on +44 (0) 207 396 3388 or click here.

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