Divide and concur

Watching Kim Jong-un’s Eunha-3 rocket belly-flop into aquatic ignominy, I couldn’t help feel the fresh-faced despot was being given a cruel, if thoroughly deserved, lesson on the difficulties of inheritance.

In a moment of over-excitement, the young man managed to undermine decades of his father’s military peacocking in one fell splash.

While such a calamity is unlikely to befall most families, the fear that the next generation will fail to protect their inheritance is on the rise among the world’s wealthy. Unsurprisingly, this panic is at its highest pitch when deciding how, and indeed whether, to hand over that totemic inheritance staple, the house.

A new study by Barclays Wealth into the attitudes of High Net Worth Individuals (HNWI; the rich) reveals that over a third have already lost faith in the next generation. Instead, they fret that their children will become indolent spongers, who will blow their inheritance “recklessly and lose their ambition or even their health,” according to the report.

The issues are universal ones faced by any homeowner with offspring. Who do I give it to? How can I split it fairly? Can I beat the tax man? If I sell up, relocate to a velour-carpeted seaside bungalow and blitz all of the leftover cash on bingo and cruise holidays, will my children begrudge me?

For the HNWI, though, these difficulties are magnified. For one thing, there are often many houses. Trying to decide how to split one house between two children is hard enough, but how do you even begin to work out how to divvy-up seven properties between three of them? Then there is the emotional aspect of it. One house, usually the main family residence, will carry a higher premium than the rest of the estate. Do you put a clause in the will so the children have to draw silver straws to decide who gets which property? Maybe it’s better to sell the lot and buy an easily divisible number of Barratt homes – a move that is likely to leave the children baffled and satisfied in equal measure.

These added layers of complication, predictably, lead to conflict.

A whopping 46 per cent of the £10m-plus HNWI families fall out over how to disburse their cash piles. But the ferocity of in-fighting drops notably as money gets tighter. Only 38 per cent of those families in the £2m-plus belt squabble about splitting the spoils: after wallowing in such poverty, those children are clearly ecstatic to get anything.

The real worry, though, is the impact that conflicts can have on the way the next generation cares for what they are given.

Oddly, the study found that the treatment of the inherited object, whether it’s a Chippendale lounge-set or silver dinner service, closely mirrors the relationship between the inheritor and the original owner. Hand-downs become “highly associated with the person who gave them to you, and with their value system”. So, if money is passed on from a disliked and troublesome family member, the receiver is inclined to invest it in blithe inebriation. But if the relative was much loved and respected, the spending of it is likely to be restrained and directed towards more salubrious activities.

The difficulty with this argument is that it is unclear how it can be applied to property – or indeed any asset that can not readily be exchanged for quick-fix stimulants.

If you are lucky enough to be bequeathed a house by a parent with whom you did not always see eye-to-eye, there is not a great deal that you can do. Beyond leasing the premises as a crack den or setting fire to the building in an insurance fiddle, it is hard to express any deep-set discontent with the relationship. Similarly, being over-zealous in showing appreciation for a deceased parent could result in the inherited house and its decor suspended in geriatric animation.

Fortunately, there are legions of charge-by-the-hour gurus who are happy to help HNWI offspring make these choices.

For the rest of us, for whom the Swiss trust fund remains a distant dream, there is some comfort in knowing we shall never face these tough decisions over our parents’ legacy. Instead, we must make time to focus on other things, like whether it’s more respectful to use eBay or a charity shop to dispose of their old furniture.

Ed Hammond is the FT’s property correspondent

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