Benefit from passing on your wealth during your lifetime

Two questions need to be asked in connection with the legacy strategy:

• Should the assets be passed on to my family or, at least in part, to a third party?
• Should I transfer my assets during my lifetime or following my death?

We often see our clients giving gifts to children or making donations for philanthropic purposes (Figure 2). The different approaches are not mutually exclusive, meaning that combinations can also be chosen.

• Age of your children: children require some assets (e.g. liquid assets, real estate) at the age of 30 rather than at the age of 60, as by this point they will likely already be secure at an advanced age. However, it can also be worthwhile for parents to involve their offspring at an early stage in connection with other assets (e.g. company shareholdings) so as to ensure that they can acquaint themselves with potentially new topics.
• Growing together: by passing on their wealth during their lifetime, parents are able to give their children recommendations and grow together with them. This mutual exchange allows both sides to benefit from one another.
• Experience: for parents, passing on their wealth early allows their children to gather valuable experience in dealing with assets and improve their financial expertise. This will help them further down the line in making well-founded decisions.
• Expectations: parents often fear that their children will squander their assets after passing them on or make poor investments. By transferring their wealth during their lifetime, parents have the opportunity to clearly communicate their expectations and dispel any concerns.
• Values: while parents are still alive, they have the opportunity to pass on their values to their children. Discussions about values can provide important guidance for future investment decisions. Experience shows that if parents succeed in communicating their values and goals to their offspring with respect to wealth structuring, this generates a sense of security and satisfaction for both the parents and their children.
• Financial aspects and taxes: as parents often find themselves in a significantly higher tax bracket, it can make sense from a tax perspective for them to pass on their wealth at an early stage. Their children also have the opportunity to invest the income generated from these assets in their retirement provision in a tax-efficient manner.

In our consultations, we recommend that our clients communicate openly or put down in writing any thoughts they have about passing on their wealth to their children. This ensures that their children gain an insight into their motivations. For parents, transferring wealth during their lifetime also has the decisive advantage that they are able to participate directly in the success that the handover of their assets yields.

If, for example, an advance inheritance or a gift is granted, meaning one of their children can build up a successful business, the parents are able to celebrate this success together with their offspring. After the testator has defined their legacy strategy, we recommend coordinating the handover of assets openly with the family in order to avoid any potential conflicts.

A further important element where significant volumes of wealth are involved is the staggering of the transfer process. In practice, we often see that funds are initially provided for the purchase of a home, with investment funds being transferred at a later date. This staggered approach allows the children to familiarize themselves with the topic of real estate first and then later with investments and the stock markets. This enables them to gradually grow into the different financial topics.