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Intergenerational Wealth Planning

What is Intergenerational Planning?

Increased longevity is becoming a salient issue for financial planners and will be one of the biggest personal finance challenges for our generation and the next. There’s a good chance we’ll all live longer than our parents. With this increased lifespan comes a need to ensure that we have access to quality care and support in our later years.   

When you have worked hard to build your wealth, it is only natural to want to pass as much as possible on to your family. But it can be a difficult topic to approach, particularly when your children are already financially independent (possibly with families of their own). A good financial plan will help you look at the options in a positive way, allowing you to balance your own needs with providing a legacy. 

Starting to plan now can help to ensure that more of your money ends up in the hands of your loved ones when they need it most. 

What are the benefits?

Your financial plan will likely include IHT exemptions (like gifting) and will therefore be a key player in reducing the IHT bill paid by your loved ones. With IHT currently sitting at 40% for the part of your estate above the £325,000 nil rate band, reducing this tax burden is increasingly important. 

3 generations of family sit together

What are the potential risks?

There can be a number of risks involved in building, maintaining, and transferring intergenerational wealth. This includes financial things like, IHT, inflation, and market fluctuation. But it may also include non-financial issues such as starting conversations about money with your loved ones.

Your financial planner will consider these risks when building your financial plan and will be able to support you with things like starting those tricky conversations. Discuss the risks with a Certified Financial Planner.

How do we use intergenerational planning in your financial plan?

Good financial and estate planning is essential if you want to pass your wealth on to younger generations and avoid the risks of your legacy being eroded by tax. 

A good financial planner will help balance the money you need to look after yourself, with the desire to help your family. To ensure this remains a part of the transfer process, we advise you on ways to manage and reduce IHT, including making gifts, setting up trusts, life insurance policies to cover your IHT bill, tax-efficient investments to benefit from Business Relief, and more. We also help you with pension planning (including your children’s pensions with Junior SIPPs) and planning to pass money on to your children (including Junior ISAs, and NS&I Premium Bonds). 

A big part of the intergenerational wealth planning process is helping you hold frank conversations with your beneficiaries and financial planner to help you protect and achieve what matters most to you. Having your financial planner in the room can help to ensure the discussion remains constructive, productive, and proactive. 

As Richard Hudson says, “A doctor who operates on himself has a fool for a patient”. This is certainly the case if you believe financial issues will be solved without talking about them. 

Don’t operate on yourself, get a professional.  

Talk to an adviser

Questions we get asked a lot

If you aim to build intergenerational wealth, you must first get talking. Open a dialogue with your family in which you can be open about financial affairs and share information. Creating these discussions can be tricky, but a good Chartered Financial Planner can help you to do so effectively.  

When you do consult a professional planner, they will have the expertise, knowledge, and skills needed to create strategies which preserve and maximise your wealth. These strategies will likely include: 

  • IHT exemptions. For example, if you make a gift and live a further seven years, no IHT will be payable on the amount (so long as it does not exceed the annual gifting allowance). 
  • Pension planning. This includes planning your children’s pensions with Junior SIPPs and passing on your pension. 
  • Passing money to your children. For instance, you may set up Junior ISAs (which allows annual tax-free savings of £9,000) or invest in NS&I Premium Bonds. 

We use cashflow modelling to show you how much money you’ll need to maintain your lifestyle, whilst also considering potential later-life care expenses, and factoring in wealth transfer. This planning lets us identify any excess assets, that can then be passed onto the next generation, without fear of running out of money! 

That is why early planning is so important.  

From the moment we start talking with clients about setting up an expression of wishes for pensions, will writing, trusts, and gifting, the topic of beneficiaries is on the cards. 

There is an obvious advantage of visibility. For this, we provide an environment to change the statistic that 41% of Millennials and Generation X feel uncomfortable talking about money. But getting your beneficiaries involved can also help with building up money management skills in preparation for the transfer.  

We can start to offer help and advice to family members, and begin asking questions such as, whether you think your children will be able to cope with this amount of money? And if not, what could we do to help them?  

With the cost-of-living crisis, a sudden windfall of funds could be gone in months if money management skills have not been developed before the transfer.  

This means that having a trusted financial planner around to establish and implement a sound financial plan based on your beneficiaries’ circumstances and goals is now more important than ever. 

People are going to be looking at their finances now more than ever before. There is a huge opportunity (and need) now to spark conversations that you have not had before.  

With a team of financial planners from diverse backgrounds, your beneficiaries wouldn’t have to speak to the same planner, either. 

For some, it is more beneficial to have a different financial planner. For instance, if your adult child is your beneficiary and would like to access a financial planner, they may relate more to one of our younger advisers.  

When offspring over eighteen use a different planner to that of their parents, there is an open space to discuss their dreams and ambitions without fear of what their parents may think.   

With technology gaining more and more traction in the finance profession, we have seen a change in the way young people engage with money matters.  

Financial planners need to be changing alongside this trend and adapting their services to fit the needs of their clients. 

For us, this means a stronger focus on tools which help our clients manage their finances online. For instance, we have ‘fact find online’, an expenditure sheet with access to open banking, and a risk profile, which help clients to understand where their money comes and goes, risks involved in their approach to money, and learn key differences between financial terms. 

If you are transferring wealth down to the next generation, these online tools may be a good starting point for getting your beneficiaries involved. 

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