Caroline Garnham on why making a will sooner rather than later is one of the smartest wealth-management moves you can make
In the august drawing room of C Hoare & Co at the top end of Fleet Street, a select few clients and contacts were tapping their toes and drumming their fingers to the clever lyrics being sung by Cathryn Craig, accompanied by her partner Brian Willoughby: ‘You can botox, detox, but you’re goin’ to die.’
I don’t think anyone in the room was being told anything new, but it was particularly poignant for me, given that I had just drafted a will for a client which was burning a hole in my bag. My client, who is not much older than me, was dangerously ill in hospital having haemorrhaged most of his blood following a routine operation.
Although not life-threatening, it had given the family a nasty shock. His wife was already battling cancer and he was concerned about the future of his young children. The prospect of losing one parent was bad enough for those young lives, but the prospect of losing them both was very sobering indeed. My client had recently sold his company for a sum in excess of £100 million.
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He was finding this hard enough to deal with, but how were his children going to cope with such a large fortune without parents to guide them? Who could he trust to do this job for him if he was not there? And, even if he survived, what should he do to ensure that this considerable sum of money did not spoil them?
For many ultra-high-net-worth families making a fortune is often not the overriding purpose when you first embark on a business. Your aim is to provide your customers with a service and a product that is unrivalled by the competition. You become an expert in your field, whatever it may be: construction, pharmaceuticals, hotels, fund management, banking or whatever.
You may on occasion think about what you would like to do with your wealth once cashed, but rarely do you think about the negative aspects of wealth creation. The temptation is to consider only the advantages – the home in the south of France, the private jet to avoid the security-check queues at Heathrow, the holidays and the parties. However, there is responsibility that accompanies it.
Wealth is like fire: when contained, it can provide warmth, energy and light, but when out of control it can destroy and destroy absolutely.
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Facing the prospect of death, whether our own or that of a loved one, is often a sharp reminder of the responsibility of having wealth in excess of your family’s requirements. Most people are aware that they need to write a will and consider ways of mitigating tax (unless you see the payment of tax as your duty to fund the infrastructure of your country, your politicians and your queen).
A will is therefore essential, especially if you are UK-domiciled (which is different from being UK-resident). It is the document which distributes your assets on your death. If you do not have a will then your assets will be distributed according the rules of intestacy, which are unlikely to accord with your wishes.
If you are not UK-domiciled, you may be subject to another country’s succession rules, which could be the rules of Sharia if you are a Muslim, or the rules set down by Napoleon – the forced heirship rules – if you live in Continental Europe. Unfortunately, each country has slightly different variations on these.
Their harmonisation has been given very little government time in any country, with the result that there are conflicts and omissions in every aspect of a cross-border estate. A UK domiciliary with a house in France and a business in Italy, for example, will have some complex succession issues to deal with. However, if they are not dealt with before your death you can create huge headaches for those that survive.
This is precisely the type of dispute – i.e. one where there is no clear answer – which can fuel expensive disputes and encourage a breakdown in communication within families.
It is for this reason that if you are a founder and have money surplus to your family’s requirements, you should try to iron out any cross-border difficulties before you die. You should also consider ways to set up structures in which you can involve your children during your lifetime. In this way you can help them to deal with the management of money, and enable them to gain experience of dealing with advisers, investment managers, tax and philanthropy, while you are still here to guide them.
You can also gain invaluable experience of working with your children, the better to understand who is likely to be a good steward of wealth and who is likely to squander it. Tensions and disputes can therefore be observed and mechanisms put in place to encourage good stewardship and discourage meaningless dissipation of your wealth.
It is not therefore enough to make a will, and hope that everything will somehow be taken care of. It may not be wise to leave the huge burden of managing money to your wife, trustees, children or charity, just at the time when you are no longer there to provide them with advice and guidance.
