UBS’s latest Investor Watch report found around forty percent of high-net-worth investors do not have an up-to-date will or wealth transfer plan.
Over the next 20 years, the world will experience the greatest transfer of wealth in history with $84 trillion expected to pass down to younger generations in the US alone. UBS’s latest Investor Watch report, which surveyed 4,500 investors in 14 markets with at least $1 million in investable assets, found that around 40% of investors globally have not formalized an inheritance plan, due to the complexity of dividing their inheritance fairly.
Fifty percent of investors surveyed have not shared where assets are held, how they intend to divide them, or how much they are worth.
Navigating a wealth transfer can be a complicated and emotional issue. Two-thirds of investors struggle with how to share their wealth in a way they consider fair, particularly if it means dividing assets unequally among heirs. Investors who chose to favor some of their heirs over others are clear about why, with 80% giving more to heirs they have closer relationships with. Others cite what their heirs’ financial needs are and how much responsibility they have in taking care of their benefactor as they age.
Iqbal Khan, President Global Wealth Management and President Europe, Middle East, and Africa at UBS, said: “While investors overwhelmingly want the inheritance process to go smoothly, inadequate inheritance planning can be costly and could lead to unresolved family conflict.
“Every family has different values and should be supported by a team of professionals who can help them develop a personalized strategy to preserve what is
most important to them.”
For heirs, having conversations about wealth is also difficult but discussing inheritance plans too late may create challenges:
- A third admit to having unresolved issues and conflicts with other heirs.
- Nearly half said one of the biggest barriers to open communication was the fear of appearing selfish.
- Among investors who have received an inheritance, four in 10 wish they had been more open with their parents beforehand.
- For those who served as executors, 64% said carrying out their parents or relatives last wishes was difficult.
- Different family dynamics can complicate inheritance plans. Families that include stepchildren face even greater struggles dividing assets. Eighty-seven percent of blended families struggle with dividing assets fairly, compared to 62% of non-blended families. Investors without children are more likely to leave a higher proportion of their wealth to charitable causes (40%), compared to investors with children (30%).
Business owners face additional complications when addressing the wealth transfer—particularly since the business is often the most valuable asset and difficult to pass on. Six in 10 business owners struggle to divide assets fairly. Around half (47%) hope to leave their business to family, but many have no estate plan and have not discussed their intentions with heirs or set expectations about business transition plans.
The majority of investors and heirs agree that the best form of action is ongoing and purposeful communication, and around half of all investors surveyed expressed interest in including a professional to help facilitate wealth transfer discussions.
Sixty eight percent of investors surveyed in Asia Pacific have concerns about transferring their wealth and want the process to go smoothly. Seventy two percent said it was challenging to divide their assets fairly. Among heirs, 43% wish they had discussed inheritance plans with their benefactors before they passed away and many who served as executors said carrying out their benefactor’s last wishes was difficult.
Three quarters (76%) of investors in Latin America are concerned about the wealth transfer, with 78% percent finding it challenging to divide their assets fairly. Nearly half of heirs in the region regret not discussing inheritance plans with their benefactors before they passed.
Around three-quarters of investors in Western Europe and 80% of investors in the UK and France find it challenging to divide assets fairly, compared to the global average of 66%.
Compared with the global average of 66%, only 53% of Swiss investors surveyed struggle to divide assets fairly. Swiss investors face fewer barriers to communication. Seventy two percent say they speak openly about financial issues in the family with only 15% stating they’re not sure how broach the topic. Only 15% of heirs in Switzerland faced conflicts with other heirs and 22% said they had unresolved issues. Twenty five percent wish they had discussed inheritance plans with their benefactors before they passed.
United Arab Emirates
Investors in the United Arab Emirates have open conversations with their heirs about important financial information and heirs are aware of how much wealth they have (57%) and how their wealth will be divided (61%). However, a greater proportion of investors in the United Arab Emirates (91%) struggle to divide assets fairly and consider many factors when deciding how to divide their wealth among heirs.
US investors are more prepared for the wealth transfer than other markets surveyed, , but still more than one-quarter of US investors (28%) do not have a wealth transfer plan in place. Eight in 10 investors say they want the inheritance process to go smoothly, with nearly as many concerned about minimizing taxes (76%) and making sure that beneficiaries use their inheritance wisely (68%).