1 in 3 families feud over inheritance

Thirty-two per cent high net worth individuals in the UAE surveyed for a wealth management report claim they have experienced family tensions as a result of wealth.

Reflecting the fact that an unfortunate drawback of wealth is its ability to cause conflict – and in the context of succession – family conflict, 40 per cent of global wealthy have had direct experience of family wealth leading to disputes, according to the report titled ‘The Transfer of Trust: Wealth and Succession in a Changing World,’ which is based on a global survey of more than 2,000 high net worth individuals.

This figure was highest among respondents in India, with 61 per cent of those surveyed stating that they have encountered family conflict due to wealth – a sentiment echoed by respondents in Singapore (53 per cent), Hong Kong (51 per cent) and Monaco (51 per cent), according to the latest report in the Barclays Wealth Insights series.

Conversely only 11 per cent of respondents in Qatar, 28 per cent in Switzerland and 32 per cent in the UAE said that they have experienced family tensions as a result of wealth.

The report also shows that those with more children are also less likely to encounter such disputes over family wealth. Globally, 47 per cent of respondents with no children state that they have seen wealth lead to family conflict, as opposed to 32 per cent of respondents with four or more children.

Catherine Grum, Director, Wealth Advisory, Barclays Wealth commented: “In the case of wealth that has been inherited, tensions around entitlement may lead to disputes. However, it is surprising just how many wealthy respondents report experiencing such conflict and the impact that source of wealth can have on this, with wealthier respondents more likely to have encountered such conflict.”

Among global respondents, the report reveals that those with higher levels of wealth of more than £10 million, or Dh58m (44 per cent) and those that have inherited their wealth (46 per cent) 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 per cent of respondents earning a salary less than £100,000 (Dh583,000) cite that they have experienced conflict due to family wealth, compared to only 37 per cent of those earning over £500,000 (Dh2.9m).

Additionally, three in five UAE respondents (62 per cent) said they have a will in place to ensure smooth transfer of wealth to the next generation – far less than the global average of more than three-quarters (77 per cent) of wealthy possessing a will.

“Regionally, 90 per cent 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.

“Understanding options for succession planning in advance, and seeking professional advice can provide confidence that your wealth will be wisely managed in the future,” Gilbert said.

“There are a number of different ways of going about transferring wealth to the next generation,” said the report, adding that the best known and most commonly used option for wealth transfer between generations is a will, with these legal declarations being extensively used by the world’s wealthy. The report revealed almost all of Australia’s wealthy have a will (98 per cent), followed by South Africa (96 per cent) and the US (94 per cent).

On the other hand, only 13 per cent of Japanese wealthy have a will, keeping with the cultural norms in that country, which suggests that individuals do not typically write wills; instead, they express their wishes in general and polite terms, and the family reaches consensus on how assets will be distributed. Following Japan, it’s Qatar’s wealthy that do not believe in wills – less than a quarter (22 per cent) of the gas-rich country’s rich have documented wills, followed by Hong Kong, where less than half (46 per cent) of the rich have a will in place.

The Barclays report provides an in-depth examination of wealthy individuals’ attitudes towards wealth transfer and succession planning, as well as offers insight into what the future holds for the next generation. Interestingly, it also looks at how wealth in many cases can act as a double-edged sword, leading to distrust and conflict.

The report reveals that in the Middle East and South Asia lead the rest of the world in the transfer of values from one generation to the next – and not just wealth. Two out of three (68 per cent) UAE high net worth individuals said their values were similar to my parents’ – ahead of the global average of 59 per cent.

“Wealthy individuals’ views on whether and how to transfer wealth are partly influenced by their values, which, in turn, are often learnt from their own parents,” the report said. The other countries where the rich seemed to share their parents’ values were Saudi Arabia (78 per cent) and India (74 per cent).

On the other end of the spectrum, wealthy in the Far East did not seem to share the same values as their predecessors, with less than half of Japan’s (39 per cent) and Hong Kong’s (41 per cent) wealthy saying they shared their parents’ values, and only 51 per cent of the Singapore’s rich echoing the sentiment.

The report also reveals that Middle East HNWIs show the highest levels of trust in their children to manage and protect their wealth. Almost four in five respondents (78 per cent) in the Middle East said they trusted the next generation to protect their inheritance, compared with a global average of 65 per cent – i.e., globally, 35 per cent of the rich do not trust their children in this way.

Globally, developed countries display higher levels of uncertainty when it comes to trusting their children and stepchildren to look after their wealth.

Respondents in the Middle East (78 per cent), Africa (77 per cent) and Latin America (75 per cent) show high levels of trust in their children and stepchildren when it comes to money management and protecting their inheritance, when compared to Australia (59 per cent), North America (61 per cent) and Europe (62 per cent).

Of all those surveyed, 29 per cent of global wealthy believe that inheritance places an “unnecessary burden” on the next generation, with respondents in India (50 per cent), Latin America (44 per cent) and Hong Kong (38 per cent) showing the highest levels of agreement with this.

Thirty-five per cent of respondents in the UK and the same number again in Ireland also share this view, bringing to life the concerns parents have when it comes to wealth and succession.

Wealth, happiness and family dynamics

Globally, parents want to pass on their material wealth to their children, as well as a roadmap for a happy life, but the report reveals some interesting paradoxes about inheritance and succession. Source of wealth is seen as a key determinant of financial happiness, with earned wealth much more likely to result in happiness than inherited wealth. However, wealthy respondents remain committed to passing on their wealth, with 96 per cent of global respondents intending to do so.

Despite all the potential conflicts associated with succession and wealth, the report shows that the world’s wealthy remain committed to passing on their assets to the next generation, with only four per cent of global respondents believing that this should not be the case. Globally, 60 per cent of respondents say that they require a significant level of professional advice when deciding on an inheritance plan for their children and stepchildren, emphasising the need for expert advice to guide them through this decision-making process.

The report found that 70 per cent of global respondents believe that when it comes to wealth transfer, assets should be divided equally amongst their children.

Tomorrow’s world

The report also explores what the global wealthy perceive to be the major challenges facing the next generation, and what they can do to best prepare for success in the future. “Economic turbulence” is ranked as the biggest challenge facing the next generation, with 56 per cent of global respondents expressing anxiety over the future of the economy. This is a consistent concern across all surveyed regions, reflecting the scale and intransigence of the global economic problems we currently face. It also links to the third most cited concern – “employment opportunities” – which is also deemed as a worry across the globe.

Top five challenges for the future

1. Economic turbulence/inflation/rising taxation (56 per cent)

2. Caring for ageing populations (52 per cent)

3. Employment opportunities (51 per cent)

4. Climate change/environmental issues (38 per cent)

5. Rising education costs (22 per cent)

When it comes to the skills that the next generation need to equip themselves with in order to be successful in life, global respondents advocate technical subjects, such as IT/Technology (68 per cent), Science (59 per cent) and Maths (54 per cent), rather than Humanities and the Arts.

The global wealthy also have clear ideas on the languages that the next generation should learn. The rise of China and the country’s significance for future generations is revealed in the fact that 69 per cent of respondents believe that Chinese – specifically Mandarin – is the most important language for the next generation to learn. Overall, respondents thought that Chinese was marginally more significant than English, with 68 per cent of global respondents believing English to be an important language for children to learn.

Catherine Grum, Director, Barclays Wealth continues: “The report has found that wealth is not the only thing that parents can pass on to their children. 

Sharing insight into what the future holds, imparting advice on what it takes to be successful, and the skills needed to equip younger generations to achieve their goals in life are also important to them. Respondents are aware of the growing influence of China and the globalisation of industry and are keen for the next generation to capitalise on this to give them the best chance in life.”

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