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More diverse family structures mean hard choices when passing on wealth

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As family structures in the US grow increasingly diverse, the level of complexity they face when it comes to financial matters is also on the rise.

That complexity and how families manage it will have a large and lasting impact on the estimated USD3.2 trillion in wealth expected to change hands in the US over the next generation, according to new global research of high net worth and ultra-high net worth individuals by RBC Wealth Management, conducted in collaboration with Scorpio Partnership.
 
“Society’s diversity is reflected in the diverse family configurations we see today,” says Angie O’Leary, head of wealth planning at RBC Wealth Management-US “It can be extraordinarily difficult to plan for the next week much less for something that won’t happen for years to come, but for families with complex structures, it’s all the more important to begin the process sooner than later.”
 
The report found that blended families are the least prepared to transfer wealth, yet have the greatest need because of their complex family structures. Only 24 per cent of blended families have a full plan, and 37 per cent have done nothing to prepare.
 
Nuclear families, defined in the study as two people, either heterosexual or same-sex, married with children, are only marginally better prepared than many blended families, with most having only made the basic arrangements. While 56 per cent of nuclear families surveyed have drafted a will, only a small number (26 per cent) have a full wealth transfer plan, and 29 per cent have not made any plans.
 
Single-parent families, meanwhile, are the most prepared for wealth transfer and more confident regarding financial matters, with 38 per cent indicating they have a wealth transfer plan in place, according to RBC’s research.
 
“Single-parents may have little choice to take the lead, but their hands-on approach still sets them apart from other family structures,” says O’Leary. “All families should start thinking about the security of family assets early, and review their plans regularly. The right preparation enables inheritors to better evaluate their financial options, reducing the risk of wasteful decisions and misspent inheritances.”
 
For many, talking about money, even with children, is extremely uncomfortable. But single parents are bucking that trend, with 49 per cent indicating they are comfortable sharing all the details with their children, compared with only 40 per cent of nuclear families and 34 per cent of blended families.
 
Just over half of nuclear families, or 51 per cent, rely on family members to guide the next generation on wealth matters, while 30 per cent rely on private bankers or financial advisors for more structured financial learning. By contrast, 64 per cent of single parents indicated that structured financial education was effective in building their financial knowledge, recognising the benefits of supplementing informal learning with more formal education.
 
“Families need preparation and training—otherwise the younger inheritors become afraid to use the money. But if they receive the right education, they should feel confident to be actively involved,” says O’Leary.
 
A sizeable majority of blended families (73 per cent) intend to share family assets equally among all their beneficiaries, including biological children, step-children and adopted children. Because they plan to share equally, only 15 per cent anticipate conflict among inheritors.

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