Protecting intergenerational wealth when family members are vulnerable

For family business owners, building a secure financial future is essential — not only for themselves but also for loved ones.

For family business owners, building a secure financial future is essential — not only for themselves but also for loved ones. Strategically protecting intergenerational wealth is vital when providing for future generations, such as children and grandchildren.

Without intervention and early planning, wealth typically passes from one generation to the next upon death. However, effective intergenerational wealth management enables asset- and cash-rich families to use their wealth more purposefully and tactically to support family members throughout their lifetimes.

This can be an effective strategy for helping family members begin to accumulate wealth as early as possible.

It can also help meet other goals, such as ensuring older relatives maintain their living standards during retirement or supporting more vulnerable family members.

Obvious examples include a child or adult who lacks capacity. Less obviously, there may be family members who have legal capacity but lack the ability to understand or effectively manage wealth, perhaps due to addiction, illness or other conditions which leave them vulnerable but fall short of limiting or removing their legal capacity.

Defining vulnerability

An important consideration is that the term ‘vulnerable’ is far-reaching. It can refer to someone neurodiverse, with a disability or other medical needs. It could also include someone with an addiction, in a coercive relationship or even somebody with a history of poor financial management or being taken advantage of financially.

Depending on the situation, the individual may automatically qualify for specific succession planning options. If not, their family may need to express to a solicitor why they deem them vulnerable.

Protecting what matters

Intergenerational wealth planning for families with vulnerable beneficiaries is about protecting what matters. In addition to protecting someone’s financial future, this could mean protecting them from themselves or others.

Another consideration may be investigating or protecting financial benefits, not all of which are means tested but it’s crucial to arrange your affairs in such a way that ensures the money intended to benefit the individual does so in the most effective way possible – getting it wrong can be devastating.

Selecting trustees

There are several routes you can take to protect intergenerational wealth and the future of a vulnerable family member. No matter how your family business is arranged financially, options are available to help you achieve your succession planning goals, including several different types of trusts.

The trust is usually accompanied by a letter of wishes which outlines the trust’s objective and gives guidance as to how the trust should be operated and how and when the trustee(s) should manage and distribute the trust assets. The person setting up the trust is known as the settlor, and they will prepare the letter of wishes.

The person setting up the trust can also prepare a letter of wishes to outline its objective and offer guidance on how it should be operated and how and when the trustees should manage and distribute assets.

It’s important to remember that a trust is only as good as its trustees. You need to select trustees you are confident in, and a professional acting as trustee and supporting family trustees can be very useful but also reassuring.

Navigating intergenerational wealth planning can be complex and more sensitive when a vulnerable person is involved. Seeking specialist advice is highly recommended to ensure you maximise opportunity, reduce risk, and minimise stress.

This article was first published in eprivateclient.

If you have any questions or we can assist, please contact any member of Individuals, Families and Trustees team on 0113 244 6100.

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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website.

Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.