How to prepare your family for a transfer of wealth

Family in front of a sunset

One of the most common goals we hear is people wanting to support their families. It could be helping their children get onto the property ladder, paying for the care of their parents or leaving a legacy. Yet, many still find it hard to discuss finances with their family and don’t prepare the family for a transfer of wealth.

Knowing how you want to spend your money during your lifetime is one thing, but knowing where you want your money to go beyond your lifetime is a whole different conversation, that requires an equal amount of planning. What is known as intergenerational wealth transfer is going to become a key theme in the coming years, with £300bn predicted to be passed down from wealthy baby boomers to less financially stable millennials over the next decade.

But why do so many families struggle to talk about their wealth with the next generation? Or leave it later in life to do something about it?

To get on board with intergenerational planning, you’ll first need to know what it means.

What is intergenerational planning?

Intergenerational planning involves building a step-by-step plan to ensure the smooth wealth transfer between generations, as per your wishes. It is about creating an open dialogue between your financial team and your loved ones, making sure everyone is kept in the loop about what you want in the future. Not only will this provide reassurance that your finances are in a safe pair of hands, but your loved ones will be too. You’ll have passed on the torch.

What’s blocking the way?

Here are the most common concerns about wealth transfers between generations and often why people fail to prepare their family for it:

1. Your own needs

It’s a tricky balance between your life needs, such as the cost of living, and your aspirational needs, such as a wealth transfer to the next generation.

Your life costs should always come first and foremost before any thoughts go to the next generation or your legacy. But, the two need to be carefully considered together, rather than leaving it too late.

2. Lack of control

You’ve worked hard for your wealth, so it might not be easy to think about giving away part of it. Once gifted, that’s it, you no longer have control. And this leads us on to the next concern.

3. Being irresponsible

A big concern could be the risk of squandering the money. And part of that might be down to education.

Millennials typically have a lower level of financial education. And baby boomers have staved off introducing their children to the world of financial planning. However, in a recent study, almost two-thirds liked the idea of having the same adviser as their family. 34% said they would feel ‘relieved that multiple generations are using the same adviser’.

Our chartered financial planner, Caroline Keegan, recently commented on an article about inflating inheritance tax (IHT) bills,  saying that the sooner you start planning for later life, the better, even if you don’t intend to take action right away.

4. They should make their own way

It’s an important life lesson to learn how to stand on your own two feet. But, especially in times as we’ve seen recently, there has been a significant increase in the older generation helping their children or grandchildren.

5. Tax

Tax can be a big concern, especially if there’s a risk that the recipient might foot the bill.

We discuss gifts that can be made during your life later on in the article. But if tax is a concern, it’s always best to seek advice from a financial planner before taking any action.

Why is it important to introduce your family to financial planning?

In the UK especially, talking about money remains a taboo subject, so it makes sense that people are tending to delay conversations around inheritance and later life planning.

Firstly, introducing your family to a trusted financial planner will help keep your financial plan on track with your wishes known by all. As well as helping improve the finances and financial education of your loved ones. Essentially, it will ensure everyone is singing from the same hymn sheet.

Secondly, the UK has some of the lowest inheritance tax (IHT) thresholds in the world. So, the earlier you start looking to minimise your IHT bill, the more you can do for yourself and your family during your lifetime. And the fewer complications there will be beyond your lifetime.

And thirdly, families have changed over the years. The stereotypical family image of 2.4 children is no longer the norm, which means intergenerational planning has become more complex. And more traps could catch you out.

Considerations for intergenerational wealth transfers

Making gifts

The best place to start when thinking about a wealth transfer is to make the most of your yearly £3,000 gift allowance. If you don’t use your allowance one year, it gets rolled over into the next tax year.

You also don’t pay tax on small gifts that you make out of your income, such as birthday or Christmas presents. And there are special allowances for wedding gifts too.

You can give away money above these allowances. However, the recipient will pay tax if the total value of your gifts in the seven years before your death exceed £325,000. So, this is why careful planning is needed, and your financial planner can help you with that.


Ring-fencing assets will help reduce intergenerational conflict and allow you to retain some control over the wealth transfer. One of the most common ways to do this is to include a trust in your will, but there are lots of different ways to do this.

Trusts can be complex, so it is wise to speak to a professional about doing this in the right way.

Your pension

Most pensions don’t form part of your estate for IHT purposes. And they can prove a very tax-efficient way of passing wealth through the generations (depending on the type of pension you have).

If you’re lucky enough to have other assets to support your retirement, your pension should be the last thing your touch.

Care costs

Nobody particularly likes to think of needing long-term care. So this is often another conversation that either gets delayed or ignored. However, the reality is that if you don’t consider all eventualities, your financial wellbeing and the inheritance you intend to leave could be severely impacted.

Long-term care costs have risen annually by an average of 2.9% over the past five years. And data collected by Interactive Investor in The Great British Retirement Survey 2020 shows that although 33% of non-retired people claim that not being able to afford good quality long-term care is a big financial concern, 69% had not considered it.

Factoring care costs into your financial plan will provide reassurance and help you understand how much you have for the rest of your life, as well as how much you can leave to your loved ones.

Costs of life should always come before you think about what happens after you’ve gone.

Put yourself first

You’ve worked hard for your money, so you should be enjoying it as you wish. Try not to put others needs ahead of your plans. Life is too short to be left wondering ‘what if’. If you want to know whether you can afford to move to that house, buy that car or go on that holiday, our financial planner can use cashflow planning to test these what-if scenarios and see if it’s financially feasible.

Honesty is always the best policy

Being open and honest about where you want your inherited funds to go and how you wish for them to get spent will help avoid resentment or animosity later. Without the right person guiding them, your loved ones might get left in the dark about what to do with their inheritance.

Introduce your family to your financial adviser and bring them along to any meetings that concern them. And, of course, read our top planning tips to pass on to the next generation.

If you have any questions or want to discuss planning with your family, please get in touch and speak to one of our independent financial planners.