Passing on wealth is about more than just inheritance

When you think about what you want to happen to your wealth once you pass away, you probably imagine it helping to improve the financial security of your children and grandchildren. Whether you’ve already made a will outlining your wishes or are just beginning to think about what you want to happen, passing on wealth is about more than an inheritance.

If you’re part of the Baby Boomer generation, thinking about your legacy is important. Passing on isn’t something anyone wants to think about but it’s vital to consider, particularly when you want to support loved ones.

Over the next 30 years, it’s estimated that £1.2 trillion in wealth will cascade down to younger generations. It’s likely that your wealth is made up of numerous assets, from cash and investment to property. And there are probably several beneficiaries that you want to support in some way. As a result, how you want your wealth to be distributed is a key question to answer as you plan your estate.

However, simply passing on wealth may not be enough to secure the future of your loved ones. It should go hand in hand with helping them to improve their financial knowledge and setting them on the right path to, hopefully, grow your wealth and pass on to future generations too.

Despite this many of us aren’t connecting our financial plans with that of the next generation.

Just 14% of people that benefit from financial advice have introduced their adviser to their children, according to Zurich. And just 4% have involved their children in discussions about what will happen to their wealth once they pass away.

Inter-generational financial planning can help secure a better future for those you care about, as well as giving you peace of mind. When you’re undertaking estate planning steps, financial planning with your family should be something you do alongside it.

There are many benefits to involving multiple generations with the financial planning process.

Maintaining family wealth

You may have heard of the adage that family wealth disappears in three generations. Of course, this is by no means a fact but there are plenty of examples of where this has happened.

It’s easy to see why, a few bad investment decisions, wealth dilution as it’s passed on to numerous heirs, and reckless spending can all quickly eat into the wealth you’ve built up in a relatively short space of time. Inter-generational financial planning isn’t a prevention for this, but it can certainly help.

Being involved in the financial planning process as early as possible means your loved ones understand the value of what you’re leaving them and the steps you’ve taken to secure it. Having an insight into your strategy means they’re in a better position to make decisions once the wealth comes to them.

Often, receiving an inheritance can be a time of conflicting emotions. It’s a time when loved ones are already dealing with grief but may be expected to make difficult and potentially life-changing decisions. Having a financial plan already in place can take some of the pressure off.

Let your wishes be known

Do your family know what you’d like them to do with the wealth you leave behind? Receiving an inheritance can be a daunting prospect. Taking the time to speak to your loved ones now and explaining what you’d prefer can help give them a sense of direction.

Whether you inherited wealth or have built it up yourself, the fact that you’re planning on passing at least a portion of it on means you likely have some experience to share. This is the perfect opportunity to support financial knowledge in your family, allowing them to make informed decisions in the future.

If you have a specific idea for how you’d like any inheritance to be used, inter-generational financial planning can help you demonstrate why you think it’s the best course of action.

Of course, there’s no guarantee that your loved ones will follow the path you want. But being open about how you envision the wealth being used can greatly increase the chances of it happening.

Understand their aspirations

On the flip side of the above, you also need to recognise that your aspirations may be very different from those of your children or grandchildren. Financial planning as a family can help you align different objectives to create a strategy that works for everyone.

The long-term financial plan you’ve created may not be suitable once you factor in what your future beneficiaries want to achieve.

You may also find that providing some financial support for loved ones now, rather than leaving an inheritance, will improve their security and wellbeing to a greater extent. For example, supporting children as they move up the property ladder by providing additional capital or covering the education costs of your grandchildren.

Inter-generational financial planning is a chance to understand what different people want from life and how wealth can be used to support these goals.

If you’re planning how to pass your wealth on to loved ones, please contact us. We can help you create a strategy that reflects both your goals and those of family members through effective inter-generational financial planning.