| Kippreport.com

World’s wealthy see inheritance as “unnecessary burden”

November 14, 2011 5:52 by Precious de Leon

Globally, 35 percent of high net worth individuals (HNWI) do not trust their children to protect their inheritance, according to Transfer of Trust: Wealthy and Succession in a Changing World.

A part of the Barclays Wealth Insights series, the report was launched this Tuesday and is based on responses from more than 2,000 HNWIs. Apart from examining attitudes towards wealth transfer and succession planning, the survey also looks at distrust and conflict that is often a result of wealth.

The results? Globally developed countries display higher levels of uncertainty when it comes to trusting their children and stepchildren to look after their wealth. However there are pockets of optimism, particularly in the Middle East, which has displayed the highest percentage of people who trust the next generation on money management.

Here’s the list of regions showing the highest level of trust in children and stepchildren:

• Middle East (78%)
• Africa (77%)
• Latin America (75%)
• Asia Pacific (69%)
• Europe (62%)
• North America (61%)
• Australia (59%)

UNNECESSARY BURDEN?

One out of three (29 percent) of global wealthy also believe that inheritance places an “unnecessary burden” on the next generation.

Those who agree to this statement the most were found in:

• India (50%)
• Latin America (44%)
• Hong Kong (38%)
• The UK (35%)
• Ireland (35%)

This may suggest that most of the parents have earned their wealth and are unsure how much of a gap the inheritance has created to the upbringing of their children. But it’s hardly any cause to deter parents from still securing their child’s future. But perhaps with more control over how the money will be managed.

“Regionally, 90 percent of Middle East respondents place a high priority on setting up a trust fund for their children to secure their future. However, when it comes to seeking professional advice in developing an inheritance plan for their offspring, respondents are evenly split on their views,” said Rory Gilbert, Managing Director and Head of Middle East and North Africa for International Private Banking at Barclays Wealth.

THE WEALTH PARADOX: FAMILY CONFLICTS

The report also suggests that most respondents believe earned wealth is the key to financial happiness as opposed to inherited wealth.

Let’s not get in a huff here though. Despite these concerns, parents still do want leave material wealth to their children, and more importantly, a road map for a happy life. In fact, 96 percent of those surveyed say they would do so and of that figure, 70 percent believe the wealth should be distributed equally among their children. (It’s safe to assume these numbers do not consider those that follow Shariah laws on inheritance.)

However, an unfortunate drawback of wealth is its ability to cause conflict – and in the context of succession – family conflict. The report reveals that 40 percent of global wealthy have had direct experience of family wealth leading to disputes.

Conflicts were most reported in these countries:

• India (61%)
• Singapore (53%)
• Hong Kong (51%)
• Monaco (51 %).

Interestingly, the opposite was recorded among respondents in Qatar where only 11 percent said they have experienced family tensions as a result of wealth.

EARNED VERSUS INHERITED

The report reveals that globally those with higher levels of wealth of more than $15.9 million (44 percent) and those that have inherited their wealth (46 percent) are more likely to have experienced such conflict.

Yet, the reverse rings true for earned wealth, as those with a higher income are less likely to find that wealth causes conflict. Globally, 43 percent of respondents earning a salary less than $159,251 cite that they have experienced conflict due to family wealth, compared to only 37 percent of those earning over $796,256.

It also found that those with more children are also less likely to encounter such disputes over family wealth. Globally, 47 percent of respondents with no children state that they have seen wealth lead to…(CONTINUED TO NEXT PAGE)

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Tags: family wealth, high net worth individuals, hnwi, middle east wealthy, Precious de Leon, rich, Transfer of Trust, wealthy