Nearly 40 Years in Tax

What advising families has taught Stuart Ritchie about money and legacy

For Stuart Ritchie, a career specialising in inheritance tax and estate planning began with a single piece of work almost 40 years ago.

Still completing his training contract, Stuart was asked to prepare a memorandum for an elderly married couple looking at their inheritance tax position. Their circumstances were made more complicated by the fact that the wife was a US citizen, although both husband and wife were resident in the UK.

Stuart's report explained how inheritance tax applied to their particular circumstances and explored some of the options available to them. These included making use of annual gift allowances and considering lifetime giving. But he also made a rather more fundamental point: money that you spend during your lifetime is no longer part of your estate when you die.

The report was well received. A senior partner within the private client tax world described it as a very good piece of work, while the manager responsible for the clients told Stuart it was the first time she felt she had properly understood how inheritance tax applied to an individual's circumstances.

For Stuart, it proved equally significant.

“I suppose it was undertaking that piece of work that piqued my interest in inheritance tax and estate planning,” he recalls.

It was the beginning of a specialism that has subsequently given him nearly four decades of experience of advising individuals and families about wealth, tax and succession.

Wealth can bring complexity

Today, Stuart is Principal of Ritchie Phillips, the accountancy firm he founded in 2003, specialising in private client taxation and helping individuals and families manage their wealth and ultimately pass it to the next generation.

After so many years advising wealthy families, one of the things he has learned is that money does not necessarily make life simpler.

“If you are wealthy, it does add a degree of complexity to your life,” he says.

Part of the adviser's role, therefore, is to help remove or manage that complexity, allowing clients to enjoy their wealth rather than be overwhelmed by the practical, financial and taxation issues surrounding it.

And Stuart's experience has also challenged some of the assumptions people might make about those who possess significant wealth.

Rather than viewing money simply as something to spend, he has encountered many people who regard themselves almost as custodians of it, particularly where wealth has been inherited.

“People who are wealthy tend to think of themselves as being the trustee of the money if they weren't the creator in the first place,” he explains.

With that can come a sense of responsibility: both for how wealth is used during their lifetime and for what ultimately happens to it.

That responsibility may extend beyond the family. Stuart has seen clients make substantial charitable donations, whether directly to charities or through structures such as donor-advised funds.

For others, legacy is closely connected with the desire to preserve wealth for children and future generations.

When money meets family

This is where estate planning becomes about considerably more than numbers and tax.

Families are complicated. Within some there is a strong commonality of outlook and an obvious shared understanding of what should happen to family wealth. Within others, there can be competing interests, different expectations and difficult relationships.

Blended families can add another layer of complexity. So too can circumstances where one child has different needs from their siblings, perhaps because of a disability.

There is no single estate plan capable of dealing appropriately with every family. What can make a significant difference, Stuart believes, is communication.

“If there can be transparency and open and genuine conversations, it tends to make the process of transferring wealth, either during lifetime or when you pass away, a whole lot easier.”

Those conversations may not always be comfortable. But postponing them can make them considerably harder.

Don't leave difficult conversations until a crisis

During his career, Stuart has seen what happens when important discussions about money and inheritance are left until very late in life. The most difficult circumstances can arise when a family is forced to confront these questions following a terminal diagnosis.

Suddenly, decisions about inheritance, family and the future are taking place alongside illness, fear and all the other emotions that accompany the end of someone's life. Some families cope well. Others understandably find it extremely difficult.

“If there was ever an opportunity to address matters at an early stage, when those pressures don't exist, I think that's to be encouraged,” Stuart says.

Done properly, an estate plan does not have to dominate family life. In fact, Stuart argues that the opposite should be true. Once decisions have been made and the necessary arrangements put in place, the plan can largely sit quietly in the background until it is needed.

That can include conversations with those who will eventually inherit, helping them understand what has been decided and what to expect.

When family conversations aren't possible

Of course, transparency is not possible within every family. Relationships may have broken down. Conversations may be too emotionally difficult or potentially damaging. In those circumstances, Stuart believes the trusted adviser can assume an especially important role.

Sometimes he works with families where everybody understands the plans that have been made. In other cases, the client's intentions remain private and the professional advisers are left with the responsibility of helping to implement and explain those decisions after the client's death.

The important point is that difficult family circumstances should not become a reason for doing nothing. Where a conversation cannot safely or constructively take place within the family, it can still take place with independent professional advisers so that wishes are understood and properly documented.

Putting the client first

Asked what principles have guided him through his career and the development of Ritchie Phillips, Stuart's answer is straightforward.

“Everything we do is about putting the client's best interests to the fore.”

That means understanding not simply the immediate tax question but what the individual is ultimately trying to achieve. Much private client advice is consequently long-term. What does someone want their wealth to achieve? Who should eventually benefit from it? What impact might those decisions have upon relationships within the family?

For business owners there are further questions. What happens to their interest in the business when they retire or die? Who will take it on? How should ownership ultimately pass?

The tax position matters, but it forms part of a much bigger picture.

From anxiety to peace of mind

Death and inheritance are subjects many people instinctively avoid. Stuart recalls a friend who resisted making a will because she jokingly but genuinely felt that once she had completed it, “God can take me”.

She eventually did make one.

That reluctance illustrates one of the challenges surrounding estate planning. Making arrangements for death can feel uncomfortable, as if completing the paperwork somehow brings the event closer. Stuart's experience is that the opposite can happen. Putting arrangements in place can create considerable peace of mind.

Clients know the necessary documentation has been dealt with. Executors can know what will eventually be expected of them. Families can understand what arrangements have been made. Rather than constantly worrying about the unanswered question of “what happens if?”, the plan can be completed and then put away.

What does legacy really mean?

Perhaps one of the most interesting lessons from Stuart's career is that legacy is not necessarily about creating a dynasty or preserving vast quantities of wealth indefinitely.

For most people, it is something much more personal. It is about knowing that the wealth accumulated during a lifetime will reach the people or causes they care about, in the way they intended and as efficiently as reasonably possible.

That efficiency isn't simply about reducing tax. It can also mean ensuring the administration of an estate is straightforward, costs are proportionate and beneficiaries are not left waiting unnecessarily for matters to be resolved at what is already likely to be a difficult time.

Stuart has distilled much of that experience into his book, Who Will Get My Money When I Die?, which is designed to help people understand the questions they need to consider before instructing their professional advisers.

But after nearly 40 years in private client tax, perhaps the overriding lesson is simpler still.

Good estate planning is not really about death. It is about making deliberate decisions during life: understanding what you have, deciding what you want it to achieve and having the necessary conversations while there is still plenty of time to have them. For an adviser, there is satisfaction in eventually seeing those decisions work as intended.

Stuart describes it as an element of “professional pride” when, sometimes many years after the original conversations took place, an estate plan finally comes into operation and does precisely what it was designed to do. It is the culmination of something that may have begun decades earlier: a conversation about money that was, in reality, about family, responsibility and what someone wanted to leave behind.

If you would like to discuss any of the matters raised in this article, please get in touch. To find out more about Stuart's book, visit: Who Will Get My Money When I Die?