“We do not inherit the world from our ancestors, we borrow it from our children,” said Chief Seattle, an 18th-century leader. We may need to reassess the message in this saying. As of today, one in five people don’t plan to leave money for their children after their demise. A survey has substantiated this claim with its findings by establishing that many parents will not leave money to their children, a survey has found.
Following news that Hollywood actor Daniel Craig would not be leaving his fortune to his children, the debate on inheritance has stirred up across the globe. In the meantime, research from the Hargreaves Lansdown survey has found that 82% of people plan to leave money to their children when they pass away while 7% plan to leave it to other family members.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, has said, "It’s not just Daniel Craig: Almost one in five people don’t plan to leave most of their money to their kids when they pass away. Some have made sensible planning decisions for the benefit of their whole family.” Inheritance is an age-old practice, especially in the Asian community, that has long played an extremely important role in human societies, and a variety of Inheritance laws have been developed to regulate the process. We speak to members of the community and briefly outline where we stand in our cultural practices in matters of inheritance.
Criticism of inheritance
The New World Encyclopaedia describes ‘inheritance’ as a sociological phenomenon. It says the ability to bequeath property to one's children or other heirs upon one's death has been criticised as incompatible with modern views of human equality since it makes it possible for a few to amass significant amounts of wealth without having to work or contribute to the society and world.
In this sense, inheritance has for centuries become a means of perpetuating social injustice, which is the result of human greed and the absence of conscience in the development of economic systems, including capitalism.
However, in defence of inheritance, denying the possibility of handing down the fruits of one's labours to one's descendants reduces the incentive for hard work, and thus risks reducing economic growth.
Like money itself, the practice of inheritance is neither good nor evil, but rather subject to the goodness or greed of human beings who have been influenced by an all-too-often selfish and uncaring society.
Just as biological features, talents, or even skills learned from one's parents are inherited without equality or state control, inheritance of the physical fruits of one's parents' labours cannot be equalised by legislation.
However, in the Asian community, Lord Rami Ranger, a British businessman, and the founder of Sun Mark, an international marketing and distribution company, is one of the most successful British Asian businessmen in the UK whose journey from £2 to £200 million is extraordinary. Sunmark now spreads over 130 plus countries with over 10,000 products and awards.
Likewise, Lord Dolar Popat has also been involved with a number of community organisations. He is a founding Director of St Luke’s Hospice, Harrow. Lord Popat founded and funds a registered charity, the Lord Dolar Popat Foundation, which makes contributions to medical and educational institutions predominately based in the UK. Further information can be found in that section of the website.
Renowned business tycoon Laxmi N Mittal boasts of a £14bn fortune as the Indian steel magnate in the United Kingdom.
In 2020, with a Net Worth of £480Million, Akshata Murthy was declared richer than Queen Elizabeth. Akshata Murthy is the daughter of Infosys founder Narayan Murthy and wife of British Chancellor of the Exchequer Rishi Sunak. She owns £480 Million worth of shares in her father’s tech giant while Queen Elizabeth’s personal wealth is around £350 Million.
Similarly, George and Mike Jatania have had a stellar record of once being the fifth richest Asians in the UK with wealth worth £850 million.
Hindujas: third place despite cracks in the empire
Last year, the Hindujas in the Sunday Times Rich List 2021 shared the second spot with the Reubens. In 2021, the Hinduja brothers slipped to third place with an estimated net worth of £17 billion. The report didn’t fail to mention, “Cracks have appeared in the Hindujas' business empire, which has interests ranging from van manufacturing and luxury hotels to banking and healthcare.”
The Rich List 2021 further stated: “London-based Sri Hinduja, 85, has become embroiled in a legal skirmish with his three brothers, Gopi (GP), 81, Geneva-based Prakash (PP), 75, and Ashok (AP), 70, who is based in Mumbai… Sri is claiming personal ownership of the Switzerland-based Hinduja Bank, which is overseen by his eldest daughter, Shanu, and her son Karam.”
“In June last year, GP, PP and AP Hinduja had issued a joint statement to say that it is ‘very unfortunate’ that the proceedings are taking place,” The Sunday Times reported and further added that the Hindujas had gone on record to say that, “We intend to defend the claim to uphold these dearly held family values.”
Inheritance destroys families
Vijay Thakkar of Black Stone Morgate told Asian Voice, “For those families who have created wealth, have taken care by involving, trusting, and having faith in their children as part of succession planning. My belief is that among the younger generation there is a strong sense of duty towards their inheritance. They feel obliged and have the drive to continually increase their family wealth either through growing organically or diversifying into other businesses to reduce the risk.
“On the other hand, Inheritance destroys families. Youngsters can drift into laziness and inactivity, reluctant to work as they have more money than they need. They take over family businesses and often find themselves over their heads having never managed their family business before
“Education, guidance, forward planning and above all trusting your children to do the right thing is the key to success and transfer of wealth from one generation to the next.”
Inheritance Tax
The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold. The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will. Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there’s a will). Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example, if they get rental income from a house left to them in a will. People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.
Inheritance tax can be avoided
Kaushik Desai, a principal in Chown Dewhurst LLP said that in his experience as a tax advisor, as people grow older, they tend to be concerned about the inheritance tax their children will have to pay on their passing.
“Some clients do not worry about it and take the view that their children will get at least 60% of their assets, which is better than what they received from their parents.
“Inheritance tax can be avoided, however, if one gifts assets to their children and thereafter survive at least seven years before passing but you should check the capital gains tax position before gifting. I do advise that you should give away only what you can afford to give away and not expect it back, particularly as many children may have used the assets one way or another and not be in a position to return the gifted asset back to you,” Desai told the newsweekly.
He further added, “Planning your needs in retirement is essential and, with low-interest rates, one requires a substantial amount of assets to generate a sufficient income in retirement. Interestingly, reports from the government indicate that it is the people with assets of between one to ten million who pay the most in inheritance tax as those with more assets dispose of them much earlier in life.
“I would recommend that you carefully consider how you pass on your assets to your children. Some of my clients do not want to provide their children with a substantial inheritance in order that they continue to be determined and motivated to do well in life themselves. Other clients worry that the assets that they have worked hard to build may be disassembled on inheritance.
“In view of this, I advise my clients to place their assets into a trust in such a manner that their children can enjoy the income and not spend the capital. Trust can be useful from asset preservation, more so than a tax, point of view to safeguarding generations to come to enjoy the inheritance you have built up.”
Wrong hands
Sharing his sentiment on whether or not inheritance is a bad thing, Subhash V Thakrar told us, “Yes if it comes to the wrong hands. I have seen mixed cases in my advisory work with families. In some ways, we are victims of our own success in that we have educated our children very well and they have become good wealth creators in their own right. When such children inherit, I find that they are not keen to take it and often get stressed about what to do with it and all the tax implications that arise.
“Some will just feel it does not belong to them and will pass it down to the next generation. And then there are some lost cases who are eying on how much they will inherit and many end up just wasting it. These people also often end up with big legal fights on claiming their shares amongst other family members.
“These cases run on for years and beyond their own lives with huge legal bills! In such cases, inheritance is bad. I have seen cases where the next generation just gets wasted. In my view, anyone with wealth more than £1m should take advice and plan as otherwise, their heirs will not really get the desired benefits.”
Communication gap, psychological and emotional factors
Shilpa Panchmatia, Executive & Business Coach told the newsweekly that she knows of two businesses where she discussed inheritance and succession planning as part of the exit plan. According to Shilpa, the family dynamics of business is so massive that it often takes a seat at the dinner table which allows us to have open communication, or it can close communication because of the generation gap.
She said, “One of the biggest challenges that I’ve seen in both cases has been the lack of communication there has been an inherent assumption that the next generation will take over the business and sometimes the new generation is willing to and may have wanted to pursue a popular career such as being an actor or being a vlogger.
“The successor often has intense and immense knowledge about the business. Haven’t been involved in it from youth- it’s likely that they have been unable to take on a greater leadership role as this was reserved for the older generation.”
Speaking further, she said that one of the businesses where the successor took over brought in modern leadership thoughts frameworks systems, Shilpa created a completely new e-commerce channel which allowed the business an extra 33% increase in revenue.
“The other challenge that I have found is that when the exit is happening the parents are often looking to fund their retirement from the business. This can be very distressing for the business and for both parties especially if it hasn’t been discussed and a proper succession and exit plan put into place.
“So, I always tend to look at the psychological and emotional factors involved as well as the rational factors of a state in succession planning business continuity and the change in leadership and goals,” Shilpa added.
