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Everything you need to know about intergeneration wealth management

Everything you need to know about intergeneration wealth management

Considering low interest rates, high inflation and rising fuel prices, along with the recent calamitous events in Ukraine, it can be incredibly difficult to make financial decisions for yourself and your family.

In our blogs, we try to bring you a slice of all the hot topics we see during appointments with clients and one that is ever-present at the moment is intergeneration wealth. But what exactly does it mean?

Intergenerational wealth refers to assets passed by one generation of your family to another. Assets can include investments, cash, property or business.

Should we be helping the kids out?

The burning questions we often hear are, do you do it now, or when they need it? Or, should you wait until your children are more responsible with money? Perhaps you should rather keep it for when you need it…“just in case”?

But, will you ever need it?

Having a child is a lifelong commitment and we often ask ourselves as parents, “when will a become financially independent?” For some it may be 18 or 21-years old, for others even older. I can’t tell you the number of times I have joked about the fact that my dad probably thinks that I’m still dependent at 42, just because he is still the person I go to. Less so for financial assistance, but certainly to talk through my latest plans, or for some reassurance.

Whether your children are still under your roof or have finally flown the nest, many of our clients still feel a sense of responsibility.

What are the real implications of intergenerational wealth?

Building intergenerational wealth is the fine balancing act between making sure that you have enough for yourself during your lifetime, but also working out when and how to pass funds on to your family.

Some have no desire to pass on funds until they die and will make comments like, “we didn’t receive anything from our parents, so they need to forge their way themselves”. Others will have a slightly different view, some earmark funds for weddings, or  house deposits, others gift money regularly to help pay off their child’s mortgage or to help with the cost of child care..

I am in no way here to express an opinion as to which way is right as every family is different, and even the best of plans don’t always turn out as you would have hoped. It won’t be the first time we have seen a client gift money to their family hoping that they will do something “sensible with it”, such as paying a lump sum off the mortgage or saving and investing only to find a very nice new flash car on the driveway or an expensive holiday having been booked.

Sadly, once you gift physical cash you are no longer in control of what they spend it on and can only hope you have taught them well.

Others worry about the what if’s…

What if I give my daughter or son the money now and they get divorced and their spouse gets half of everything?

What if I give my grandchild some money now and they get mixed up with the wrong sorts later and spend it on drugs, alcohol or a fast car?

We all want to believe the best in our families but unfortunately, sometimes people don’t turn out as we had hoped, relationships break down or people don’t put the same value on money as the person gifting it.

Intergenerational wealth management is a tricky conundrum and one of the most emotive subjects we cover as financial planners, but it is actually one of our favourites.

How can we help you find financial guidance?

People assume inheritance tax planning or legacy planning to be extremely complex and only for the very rich. With rising house prices, inheritance tax will hit more families than ever before.

Understanding your options so that you can figure out when and how to give money, or whether to retain it during your lifetime, is personal to you. There are a great many ways to safeguard against some of your concerns, and there is often a solution to fit what you want to achieve.

Our role is to guide you. We will always talk to you first and foremost about what you want, need, and what your aspirations are for you and your family. We work with you to understand your unique family circumstances and only when we understand all of those things, will we guide you through the possible solutions, whilst highlighting the pros and cons we have seen along the way.

A nice and neat “one fits all” solution would be lovely, but planning how to pass on your wealth is a unique scenario for each of us. What’s important is finding the right solution for you, a solution that you can feel comfortable with. So if this is all ringing bells in your head, maybe it’s time to talk and work through some of your thoughts together.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

For more help and advice or to receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Yorkshire Financial Planning on 01482 275540 or complete our contact form here.



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