Get next generation ready

Why is inter-generational wealth transfer such a hot topic right now?

The baby boomer generation holds a lot of wealth in this country, and they’re getting older.  

Inheritance tax has always been a hot topic, and following the announcement in the 2022 autumn statement that the threshold where it kicks in has been frozen until 2028, it continues to be a hot topic. My colleague Leanne Harvey talks more about inheritance tax in her article on estate planning.

Also, given the current financial climate, transferring wealth is one of many financial milestones that can seem more complex than it did before. 

What’s the best way to introduce the next generation to money management? 

Education and support are crucial, so start them young. Children can learn by managing pocket and birthday money and balancing spending with saving. Set a good example and get them involved with savings accounts and Junior ISAs.  

We encourage our clients to involve their adult families in our financial review meetings, particularly as they prepare to pass their wealth on. It’s a great way for the younger generation to become familiar with their family finances. 

How can I encourage the next generation to value the money they inherit? 

It’s good to foster an appreciation of family money and how it was achieved. Talk about where the money comes from and get children to spend time around the business, the properties or the work environment.

When passing on wealth, it’s not unusual to have concerns about how it may be spent. We can help address these concerns by putting a nominal amount in an investment account for each child or by setting up a philanthropic trust.

Another big worry is that family wealth will be lost through divorce. We can make sure your money goes where you want it to, with various options for appropriate trusts - perhaps to pay for grandchildren’s education. 

What else can I do to ensure a smooth transition? 

Be organised and keep clear records in a suitable place where the right people know where to find them. Sorting out an estate is really time-consuming and difficult, especially for someone who is grieving. If your affairs are in order, your family will be in a good place to move forward.  

Write a will and set up power of attorney so that someone else can organise your affairs for you if you cannot. Take professional advice – not just from a wealth manager but also from accountants and solicitors. Professional advisers can provide continuity and some helpful handholding.

Gauge your heirs’ interests and capabilities – for example, will they take over the business, or would it be wiser to sell in advance? Most people give away wealth when it feels right for a number of reasons. They think the person they’re giving it to is in a good place financially, with a good understanding and the right attitude to working and spending.  

But, even if your children are in the right place, are you? Take some time to mentally prepare yourself to hand over control.  

It’s natural to worry about the future, particularly the next generation, but there’s a lot you can do to ease the way. Some thoughtful preparation can make all the difference for a smooth financial transition. 

If you’d like to get ready for a smooth transition to the next generation – get in touch for a free, impartial conversation.