Intergenerational wealth – financial planning that transcends generations

What is intergenerational wealth? 
Intergenerational wealth refers to assets that are passed from one generation of a family to the next. These assets can either be passed on after death (through inheritance) or passed on to the next generation whilst the giver is still alive1. 
The potential benefits
There can be many benefits to intergenerational wealth, such as:
•    Financial Security – can provide a safety net for challenging times such as loss of job or health issues.
•    Opportunities – can open opportunities to invest in higher education, homeownership, or entrepreneurship. 
•    Long-Term Goals – can help families to work towards their long-term goals such as retirement. 
In summary, intergenerational wealth planning is essential for maintaining financial stability, creating opportunities, and ensuring a positive impact on future generations.

The family dynamic 
It should be remembered; we do live in an era of increasing divorce rates across the different age groups and subsequent re-partnering and second families. So, choosing who you leave your money to, and how much, is often more complicated than it used to be. The potential for family fallouts is greater which makes it all the more reason to talk about the subject early. 

Those leaving the money will no doubt want to ensure that their beneficiaries, be it their family, friends and/or charities, enjoy their windfall. They will also probably wish to minimise the tax man’s take on their bequests in a legal and ethical way. In the 2022/23 tax year £7.1bn was collected in inheritance tax, an increase of £1bn from the previous year2. 

Having the conversation now
If you are thinking of leaving money to specific people, are you sure they really want or need the money, or is there somebody else in the family who could benefit more?  Similarly, if you think you may be in line for an inheritance, but feel your children or grandchildren would benefit more, perhaps now might be the best time to – talk about money. You might be able to see the recipients enjoy the money you have provided for them.

Whether you are the benefactor or the possible beneficiary, having the conversation now can make sure the money goes to the right person, at the right time and in the right way.

As the old BT advert said – it’s good to talk. 

Tax treatment varies according to individual circumstances and is subject to change.

Estate planning/Inheritance Tax is not regulated by the Financial Conduct Authority

References:
Generational Wealth: Overview, Examples, and FAQs (investopedia.com)
Inheritance threshold UK: how it works - Times Money Mentor (thetimes.com)
Talk Money Week: Over a third of parents gifting money to children | Canada Life UK
https://www.alanboswell.com/news/intergenerational-wealth-management/https://wealthfactory.com/articles/generational-wealth-a-comprehensive-guide/
https://wealthfactory.com/articles/intergenerational-wealth
https://ifs.org.uk/inequality/intergenerational-mobility-in-the-uk/
https://www.alanboswell.com/news/intergenerational-wealth-management/
https://www.findex.com.au/insights/article/creating-an-intergenerational-wealth-roadmap

Approver Quilter Wealth Limited, Quilter Financial Limited, Quilter Financial Services Limited & Quilter Mortgage Planning Limited. Quilter Financial Planning Solutions Limited. June 2024