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How ‘the family approach’ can prevent delays to estate planning

16 April 2021

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An unprecedented number of clients have delayed financial decisions because of the pandemic. But an indirect approach can help turn hesitation into urgency, says Nick Bird, Executive Business Development Manager at Octopus Investments

Let’s consider a scenario.

Catherine and Linda live on the same street, a few houses apart. Both are widowed and inherited large estates. They’re at a point in their lives where they need to think about the impact of inheritance tax.

About twelve months ago, Catherine had her annual review with her financial adviser. It was a little different, taking place over the phone because of lockdown restrictions. So her adviser made sure to take some time checking in on how she and her family were.

Later in the call, he raises the topic of inheritance tax.

Catherine says she is keen to go through her options. But she stresses that now is not the time. She’d prefer to wait until things return to normal to make any firm decisions. So that’s how things were left.

Linda’s review was also a simple phone call. But when her adviser raised the topic of inheritance, things moved relatively smoothly. And after three or four further discussions, Linda had begun to put planning in place.

What motivated Linda to prioritise her estate planning? And how can advisers help a client see estate planning as a priority?

The risk of delay

A survey commissioned by Octopus earlier this year found that 61% of advisers have clients who’ve delayed financial decisions because of the pandemic.

In some cases, that’s involved clients putting off their estate planning.

This is troubling. The earlier a client starts their estate planning, the better their position will be further down the line.

You only need to look at the amount of tax raised from failed gifts to see how costly delays can be. The most recent data available shows £197 million was raised from failed lifetime gifts in the 2017/18 tax year alone.

But your client won’t necessarily appreciate the urgency of estate planning. And that’s where a more indirect approach to the estate planning conversation can make all the difference.

Carrying out the wishes of the will

A client can need help to see inheritance tax planning as a priority. Otherwise, it becomes easier for them to delay their planning.

The pandemic triggered a surge in people making and updating wills , but this level of urgency hasn’t always translated into taking steps to plan for inheritance tax.

Clients aren’t in the world of tax, they’re in the world of loved ones, children and grandchildren. Ideally, a client will see the planning as an extension of making a will. It’s about maximising outcomes for loved ones. And it’s about achieving the best results for the people that matter to a client.

The client has taken the time and effort to decide who will benefit from their wealth. Now it’s about ensuring those loved ones fully benefit.

Make the conversation about loved ones

You might begin the estate planning conversation by focusing on what the client wants for their family and their family’s future. Why is that important to the client? Eventually – how might inheritance tax impact those goals?

An adviser Octopus interviewed when producing its new estate planning report put it this way:

“We tend not to start by talking about inheritance tax with any client,” says David Hardman of Ludlow Wealth Management.

“We spend a lot of time trying to understand what’s important to the client, where they want to get to and what their time frames are.

“If you identify the issue and the client acknowledges it as an issue, you don’t tend to get that deferral of ‘let’s just wait another year or two and see what happens’.”

Once a client acknowledges what’s important to them and sees that they can comfortably afford to make gifts from their estate, the most critical part of “the family approach” can take place effectively.

Involving the client’s beneficiaries

Involving the family is a good idea whether in a pandemic or not. That said, it has been especially important over the past year.

Bringing beneficiaries into discussions can help where there are concerns about vulnerability. And it’s often the younger sons and daughters that are most comfortable with video calls and remote meetings. So involving the client’s family has helped many advisers move estate planning conversations forward.

Of course, it’s also the beneficiaries who ultimately benefit from the planning, so having them in the conversation will usually help accelerate a client’s planning.

But how might you involve a client’s beneficiaries in a natural way?

Two things you’ll find in our estate planning toolkit

You’ll find two Octopus documents useful in involving a client’s wider family. One is a guide to being an executor. Another is a document we call “What I own and where I keep it”.
These help prepare a client’s family for the transfer of wealth and can be used to trigger early meetings about estate planning that include the whole family.
You’ll find these documents, along with other useful resources, as part of a new estate planning report.
The report draws on a survey of more than 700 advisers and conversations Octopus has had with advisers across the UK. It covers how you can overcome three common challenges advisers are facing when planning a client’s estate.

Read the report and access the toolkit HERE 

We do not offer investment or tax advice. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: April 2021. CAM010883