Inter-Generational Planning Advice

There have been tectonic financial changes over the last ten years. These have drastically altered what we consider the norm when it comes to conventional family financial planning and especially the way family wealth is passed down through the generations.

For example, changes to trust taxation and pensions freedoms to name just two that have been the main disruptions.

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the younger GENERATIONS

Younger generations are now drawing even more heavily on the ‘Bank of Mum and Dad’ from their finite resources.

Consider for a moment how our families have evolved over the past 300 years. The 21^st century is the first century to have 4 generations alive at the same time.

We are conditioned that the usual path is that parents should bequeath to their immediate children.  What people don’t always realise is that in doing so, inheritance tax (IHT) will have taken several tax hits out of the original capital before it is received by the fourth generation.

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Bequeathing your estate

Alternatively, families should instead consider bequeathing their estate to younger generations, so that their capital can enjoy the long term benefits of compounding: Einstein called compounding the 8^th wonder of the world.

Of all the generations, baby boomers, like me, are thought to be the most fortunate; my university was wholly funded via a government grant so was actually free of charge, and there was no student loan to repay, I have experienced a significant rise in what my home is worth now, as well as having been part of the gold-plated final salary pensions arrangement that can no longer be afforded, and like my fellow baby boomers I also enjoyed a benevolent welfare state.

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top tips for inter-generational planning:

1. Family road map: who do you want your money to go to and how it should be used?
2. Protection:  those family members who need inheritance the most.
3. Cashflow planning : agree financial planning strategies using alternative scenarios to stress test gifting ideas.
4. Business Relief Trusts: consider as part of IHT planning.
5. Residence nil rate band : fully utilise this allowance.
6. Trusts / Family Investment Companies: check whether trusts would still be effective for your family structure today.
7. Pension Planning: take advantage of pension rules to effectively protect the family’s legacy.
8. Affordability: how much can you afford to pass on without losing control or become financially dependent in the future.
9. Review : review circumstances regularly at least annually.
10. Tax changes : keep up to date with tax changes.

We are here to work together with you over you and your family’s lifetimes.