Elderly clients and increasing disputes

Date: 18 Oct 2023

Ashleigh John

Dealing with multi-generational families has always been an impressive balancing act, but how are the socio-economic circumstances of our current world changing the wealth management landscape? As populations age, does the currency of experience stand up against increasingly accessible education for the younger generations? Citywealth investigates the increase in disputes and how they’re dealt with.

According to the Office for National Statistics, the population of England and Wales has continued to age, with 2021 Census results revealing that there are more people than ever before in older age groups. Over 11 million people were aged 65 or older, which accounts for 18.6% of the population. This is compared to 16.4% at the time of the previous census in 2011. Of this 11 million, over half a million are people who were at least 90 years of age.

Those working in the wealth management industry often have an international aspect to consider, and when we look at the worldwide statistics, it’s the same story. The World Health Organization reports that the pace of population ageing is much faster than previously seen, and predicts that between 2015 and 2050, the proportion of the world’s population over the age of 60 will nearly double from 12% to 22%. To put this into more manageable numbers, it is thought that by 2030, 1 in 6 people in the world will be aged 60 or over.

People are living longer, and UHNW individuals are likely to be living even longer, given their access to the best living circumstances and medical care. It is not unusual now to see four living generations within one family, which creates plenty of opportunity for disagreement on family finances. Additionally, as healthcare continues to improve, education becomes more accessible. Younger generations are able to educate themselves on tech, finance and the law even before they are eligible for university or to join the workforce. With everything we could ever want to know at the tips of our fingers, the currency of age and experience may be losing its value.

Citywealth consulted with industry experts to gain some clarity on the situation at hand. With the circumstances ripe for disputes and disagreements, already seen with the increase in contested wills during the lifetime, how are the professionals navigating family politics in this new world?

Extended lifespans and accessible education: the effects

We began by asking how the effects of extended lifespans and more accessible education are showing themselves in the wealth management industry.

Paula Myers, Director of Legal Services for Private Client Services, and Sangita Manek, Partner in the Wills, Trusts, and Estate Disputes team at Irwin Mitchell provided more context-specific statistics: “Because of the developments in medical care and growth in standards of living, people are living longer. This unfortunately means they are more vulnerable to developing dementia or other age-related diseases which may affect mental capacity. According to figures provided by the NHS, once an individual turns 65, the chance of them developing dementia doubles every five years, and it’s estimated that currently in the UK there are around 850,000 people suffering with dementia.  According to The Will Suite Industry Report 2020, the average age of a testator in the UK is 58, while those in the age bracket of 50 to 70 years old were responsible for over half of the wills drafted in the UK. Consequently, the validity of wills written in the UK is more likely to be challenged now, based on testamentary capacity. The aging population problem is only going to continue.”

In terms of increases in disputes, Alex Dean, Head of Private Wealth at IQ-EQ, said: “Whilst it is difficult to put a figure on the rise of disputes, it certainly is the case that the number of disagreements is on the rise. Disagreements can range from general dissatisfaction to full-blown family dislocation, but without necessarily being classified as a legal dispute.”

“One very common disagreement is when the head of the family is reluctant to hand over the reins to their mature adult children. Children in their 50s are dissatisfied with playing second fiddle to an elderly parent, who may not be involved with the family enterprise on a daily basis anymore but still retains the final sign-off and veto power. In these cases, many offspring have put on hold their own ambitions or ignored their natural business interests on the promise that ‘it won’t be long’ until they have control and can really influence the future of the family business.”

Alex Dean noted that, whilst not necessarily more educated, the education children are receiving nowadays will be, in many ways, more relevant to our tech-led business environment. He said: “For example, families will likely have invested in private equity for generations, but the mechanics of how to invest have changed substantially over the years. However, the experience of the head of the family combined with the understanding of the younger generation can be a very valuable combination.”

Tom Bradfield, Associate in the Tax, Trusts, and Family team at Burges Salmon, noted the relevance of history on the increasing number of Will disputes reported in the press. He said: “[W]e are living through the period in which the generation who grew up in the immediate aftermath of the Second World War are reaching the ends of their lives. This generation is typically cash poor and asset rich, having bought property in the 1950s and 60s. Rising asset values have meant that many families who did not consider themselves well-off find there is a large windfall on the death of the parents. This sows the seeds for potential disputes. It is a particular problem for farming families, where often some in the next generation do not farm but see the potential to profit by the sale of the valuable property. Farming families also suffer from the ‘one day this will all be yours’ statement mumbled to (very often) the eldest son at a young age, on the strength of which he spends many years working for very little and who is understandably peeved when his parents’ Wills do something different.”  

Tom Bradfield also noted that caregiving responsibilities are of particular relevance to disputes in this area. Where one child has taken on the majority of the caregiving, this can lead parents to change their Will. There is also the consideration of the possible erosion of family finances, as the money is used to pay for the parents’ care. This is particularly relevant when considering what Tom Bradfield described as the “explosion in public awareness” on the issue of mental capacity. He added: “[T]he Mental Capacity Act 2005 and the introduction of lasting powers of attorney (LPAs) means those in the wealth management industry now frequently deal not with their supposed clients but with attorneys acting on their behalf. The control afforded to children acting as attorneys over the affairs of their parents creates potential for financial and other abuse. In turn, disputes between siblings over their parents’ finances, both before and after the death of the parents, are increasingly common. In many cases, it is the mere suspicion of abuse coupled with the powers of an attorney and poor record keeping which drives the dispute.”

Ken Maxwell, Director at John Lamb Hill Oldridge, said: “There is usually a reluctance for families to discuss the passing on of assets, as once the topic is raised with the next generation there is often an expectancy to receive. We do not see the legal complexities associated with this topic but we do see the next generation keen to receive assets as early as possible when they need it more rather than receiving it later in life. The problem is that clients now have to carefully consider what assets they will need to retain until death in order to support their lives. As the date of when you die is an uncertainty, it makes the planning ever more difficult.”

Addressing these issues

It seems clear that there are various, complex issues in this area arising from our current socio-economic state. We asked how professionals working with these families are adapting their practice to address these issues.

Alex Dean said: “The leading professionals understand that the core of their professional expertise is an expectation, not a unique selling point. All clients, especially in centres of excellence such as London, expect excellent and robust advice. The leading professionals realise that the real issues are frequently within the family dynamics and the often-unvoiced differences in priorities amongst family members. It is increasingly the professional’s role to identify potential issues, even before they arise. For example, do two brothers want their children to look upon each other as family members or fellow shareholders in the future? Planning for the natural splitting of the family nucleus and consideration of how this applies to the continuation of business interests and the equitable opportunities it provides each family member are incredibly important.”

Alex Dean noted that there is an importance in distinguishing between ‘opportunities’ and ‘wealth’. He said: “The assumption that all children and future generations are driven by the desire for wealth is increasingly being shunned. Some children may be nervous at the prospect of taking on such wealth, for a multitude of reasons – which, if not addressed, could be damaging to themselves or at best nullify the potential benefit to themselves and their potentially philanthropic interests.”

Tom Bradfield commented on the delicate nature of acting on behalf of the parents but dealing day-to-day with their children: “As lawyers, we are increasingly asked to act on behalf of aged parents but take our instructions from their children, including on the preparation of Wills. In many cases, the children have no formal authority to give instructions but (we are told) are simply helping their parents. Particular care is needed in drafting Wills to ensure that the instructions are truly those of the client parents.”

In these scenarios, Tom Bradfield said that professionals are increasingly alert to the possibility of abuse in these situations and highlighted the importance of taking precautions. “Even where the children are attorneys under registered LPAs the professional is never able to avoid considering the possibility of abuse. Inevitably, such precautions increase the complexity, time and expense involved in taking professional advice for an older person. Systems must be created to record who has authority to give instructions, who is entitled to see advice and so on. The professional must also consider their obligations under anti-money laundering law. At the extremes, legal professionals may be reluctant to prepare Wills for new clients who are elderly, in poor mental or physical health or where there is a suggestion of a looming dispute over inheritance. Anecdotally, it is harder than ever before to arrange for a solicitor to attend a ‘deathbed’ for a potential new client to prepare an urgent Will. That may be in large part because of the difficulty of taking the sorts of precautions described above in a short timeframe.”

Promisingly, the problems of mental capacity and succession seem to be coming further to the forefront of clients’ awareness. Tom Bradfield said: “We are starting to see senior generations of families who are very much alive to the problems of mental capacity and succession. I am often instructed to prepare LPAs by couples who wish to ensure that their children do not have the problems they themselves had in looking after their own parents. Some clients are taking steps to discuss and map out the succession to their estates well in advance. In some cases, by transferring assets and/or control of businesses to their children at a relatively young age or creating family charters. However, this is still relatively rare. Most clients seem to prefer to retain control of the family silver for as long as possible, sometimes keeping their adult children, with young families of their own, out of the loop in relation to succession plans until the last moment.”

How can clients help themselves?

As usual, the professionals are able to adapt to these new circumstances to advise their clients in their best interest. But what can the clients themselves do to help prevent disagreements?

Paula Myers and Sangita Manek called for more awareness around the importance of taking professional advice around the timely preparation of Wills: “It is concerning that people would make plans in relation to leaving their entire lifetime wealth, often worth hundreds of thousands of pounds, to their preferred beneficiaries without considering the possible taxation consequences and the potential challenges the distribution may attract. With the growing awareness of claims under the Inheritance (Provision for Family & Dependants) Act 1975, we would hope people would be encouraged to take proper advice to plan for and hopefully avoid claims against their estates.”

They also commented on the lack of legislation regulating will writing, which “alongside a general reluctance by the public to invest in proper estate planning” has resulted in an increase in will writers, online wills and homemade wills being made. They said: “This has led to an increase in wills that are not fit for purpose, not representing correctly a client’s wishes and/or not having followed best practice. Such wills are likely to be more vulnerable to challenge from disappointed beneficiaries. Indeed, wills are available online for as little as £19.99.”

Tom Bradfield cited communication as the most helpful approach to potential dispute over succession. He said: “Families should be encouraged to air and discuss plans for succession at an early stage. In the best case, young children may feel that the agency afforded to them by including them in succession planning makes up for the fact that they may not inherit what they had expected. In the worst case, latent disputes are flushed out while there is still time to discuss and resolve them. If nothing else, everyone in the family knows where they stand and can make plans accordingly. If families do take this approach, they need to take it seriously. The recent case of Guest & another v Guest demonstrated the willingness of the courts to enforce promises made by parents to a son in circumstances where the son relied on those promises to his detriment and the parents later tried to row back on them. The fact that the Guests faced the prospect of losing their farm over the dispute should highlight the very real consequences of such promises.”

Ken Maxwell also highlighted the importance of communication and said: “The more we are able to discuss planning with clients from an early age the better, but going back to the topic above, if clients are living longer then they will need to be careful what assets they can afford to gift at an earlier age as part of that process. Unfortunately for the next generation, they tend to need the gifts at a younger age when they have mortgages/school fees to pay rather than when they are in their 60’s and nearing retirement, so there is an argument to skip a generation on such things as gifts and planning. Although not surprisingly, this often causes arguments with the next gen.”

The closing thoughts

Finally, we asked our experts for their concluding thoughts on what is top-of-mind for those dealing with elderly clients and their ever-complex circumstances.

Alex Dean: “No one client is the same and it is important to really understand the rationale behind the stated goal or objective of an elderly client, or any client for that matter. Some clients may say they do not want their children to inherit the family wealth. In some cases, this may mean they don’t want their children’s spouses to have a claim to it! Alternatively, they may say they want to pass the operations of the business to their children upon a certain age but don’t plan on ever giving up the final veto. Their rationale here could be to provide their children with the necessary tools and education while encouraging them to make their own wealth and achieve independence and self-worth.”

Ken Maxwell: “At John Lamb Hill Oldridge, we focus on Inheritance Tax and insuring the risk, which in our opinion is an even more important part of the planning package than previously as it enables clients to retain the assets and insure against the eventual tax when they die, therefore reducing the risk that they leave themselves short of money for care etc as a result of gifting too much too early.”

Tom Bradfield: “Although second families are nothing new, advances in medical care mean that old assumptions that a person is “beyond childbearing age” are increasingly open to question. Families are often suspicious of a new love interest in a parent’s life, but more complex questions arise when adult children living in settled expectation of an inheritance unexpectedly acquire a new sibling. The minor child is clearly not the one at fault, but the extra attention and resources directed to them can be a powerful source of disputes within families.”

Paula Myers and Sangita Manek: “We need to give more thought to the changing structure of the family unit. This changed with an increase in second and third marriages, blended families, cohabitation and the emergence of the multigeneration family living together.  This has led to more complex relationships within the family unit which in turn has led to multiple parties having expectations in relation to the division of assets on death. Further, those now reaching old age have benefitted from a rise in family wealth due to the boom in property ownership in the 1970s which has led to them having acquired significant wealth tied up in property assets.  This has resulted in a situation where a generation of people from modest backgrounds are now looking to pass on valuable estates to family members who have made life decisions on the ‘expectation’ of this inheritance. If these expectations are disappointed, potential beneficiaries now often feel that they have no other option but to litigate, particularly having regard to the difficulties now felt by individuals to get on the property ladder. Another risk area for elderly clients is that of undue influence. With a growing aging population, the elderly are relying more upon carers to help with day to day living and this can potentially make them vulnerable to undue influence by those who simply want to get hold of their assets.”

Many thanks to the experts who contributed to this feature.

Subscribe to our weekly newsletter here, to ensure you don’t miss out on any future features.