It might sound complicated, but ‘Intergenerational wealth planning’ simply describes the process of finding the best approach to transfer wealth within a family. In this article we explain what intergenerational wealth planning is, what it involves, and how it can help families preserve their wealth.

Over the next 30 years, an estimated £5.5 trillion is expected to begin changing hands between different generations of families in the UK, either through inheritance or gifting. It’s been described as the ‘Great Wealth Transfer’, and it means the next generation of beneficiaries will inherit more overall wealth than any generation before them.

Over the next 30 years, an estimated £5.5 trillion is expected to change hands between generations

The complexity of transferring wealth between generations

Today, more people are starting to think about the role they need to play in the lives of different family relations around them. Some might be thinking about how to pass wealth on to their children and grandchildren. Others may want to fund long-term care for older relatives, while also paying for their children to go to school or university.

But with people living longer in retirement, and often needing more healthcare and living assistance as they get older, transferring wealth between generations can be complicated.

Among all of this, it makes sense to ensure that any transfer of wealth is done as efficiently as possible, without necessarily losing access to that wealth completely. As a result, careful intergenerational wealth planning has never been more important, or more complex.

What is intergenerational wealth planning?

Put simply, intergenerational wealth planning involves taking steps to decide how you and your family can use its collective wealth to support each other, during your lifetimes. It’s about putting those all-important decisions into your hands, so that the people around you can benefit as you intend them to.

HMRC raised £29 billion in IHT receipts between April and August 2022 - - a £300 million increase from the previous year

The inheritance question

Inheritance is one of the central aspects of any intergenerational wealth plan. With so much personal wealth accumulated by those in (or approaching) retirement, the inheritance they leave behind can make a massive difference.

At the same time, it’s critical to understand the impact that inheritance tax (IHT) could have on the value of your estate.

Here in the UK, most personal wealth belongs to the ‘baby boomer’ generation (those born between the late 1940s and early 1960s), and is held by people who have already reached retirement age. Generous final salary pension schemes, coupled with significant increases in house values and stock markets over the last few decades, mean more people are likely to leave behind a large inheritance to their beneficiaries.

But every year, thousands of people pass away and leave behind an inheritance tax bill for loved ones to deal with – drastically reducing the value of their inheritance. Figures published in September 2022 by HMRC confirm it raised £29 billion in IHT receipts between April and August – a £300 million increase on the same period in 2021.

With the right intergeneration wealth planning in place, you can minimise – or even eliminate – the impact of IHT on your estate, ensuring you can pass on more of your wealth to the people you care about.

What about helping the younger generations now?

Intergenerational wealth planning is about more than simply planning for after you’ve gone. People with significant wealth are often keen to make sure their family is looked after while they’re still alive and want to witness the benefits for themselves.

For this reason, your own plan may include school or university fee planning, helping younger generations to buy their first property, or putting money into a trust. It could even include providing financial support for younger children in the event of parental death.

Intergenerational planning will ensure all family members, both young and old, are better off in the longer term

Using intergeneration wealth planning to support older generations

At the other end of the family spectrum, some people use intergenerational wealth planning to help them plan the future with their own parents. This might involve reviewing parents’ financial arrangements, determining who stands to inherit their estate, investing to help fund long-term care or assisted living, or putting plans in place should their parents lose mental capacity or become vulnerable.

A comprehensive wealth planning approach

Whichever generation you’re in, it’s important to consider intergenerational wealth planning as a valuable financial planning strategy. It’s capable of covering a broad range of issues that can positively affect all members of your family unit, both young and old, to ensure your loved ones are all better off in the longer term.

Get in touch

All families are different. At Amber River, we work with individuals and their families to help them take the best approach to transferring wealth within their own family unit. We aim to make people feel confident and reassured about their family’s financial future.

To speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.

Article sources:

Kings Court Trust research
https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk/hmrc-tax-receipts-and-national-insurance-contributions-for-the-uk-new-monthly-bulletin
Estate planning Intergenerational planning