Passing on your wealth to loved ones could transform their lives and mean they have more opportunities in the future. However, to get the most out of the “great wealth transfer”, younger generations need to be prepared to manage their inheritance.
According to September 2024 data from Vanguard, it’s estimated $18.3 trillion (£13.45 trillion) in wealth will be transferred globally by 2030. It’s expected to be the largest intergenerational transfer of assets in history, leading to it being dubbed the great wealth transfer.
In the UK alone, it’s estimated that £7 trillion will pass between generations by 2050.
Receiving an inheritance provides your loved ones with a chance to improve their financial security and reach lifestyle goals, from home ownership to travelling. However, with previous US research suggesting that up to 70% of affluent families lose their wealth by the next generation, you might want to think beyond assets.
Ensuring your wealth is passed on in line with your wishes
When you’re creating an estate plan, taking steps to ensure your assets are passed on in line with your wishes is essential.
If you want to leave assets to loved ones after you pass away, writing a will is often a priority. A will lets you state what you’d like to happen to your assets when you die. Without a will, assets will usually be distributed according to intestacy rules, which could be very different from your wishes and mean some intended beneficiaries are disinherited.
There are other alternative options to consider as part of your estate plan, including:
- Gifting wealth during your lifetime. This has the benefit of allowing you to see the positive effect your wealth has, and a chance to offer guidance. In some circumstances, gifting could also make sense from an Inheritance Tax perspective.
- Use a trust to pass on assets. If you place assets in a trust, you can set out how and when they can be used, and name a trustee to manage the assets on behalf of your beneficiaries. It could allow you to retain greater control and preserve wealth. Trusts can be complex, and you may benefit from seeking legal advice if you want to set one up.
With an estate plan setting out how you want to pass on wealth to your family, you can start to think about how to ensure your beneficiaries are equipped to manage it.
Communication could be key to preparing your beneficiaries
While wealth can be something of a taboo subject, talking about money and other assets could be hugely beneficial for your loved ones.
Talk to your beneficiaries about your wishes
Many people in the UK don’t discuss what they want to happen to their assets after they pass away. According to an October 2024 report from The National Will Register, 53% of adults haven’t done so.
As a result, it’s likely many beneficiaries are unsure about what they’ll inherit and how assets will be passed on. This could lead to them feeling overwhelmed when they receive the inheritance and potentially make poor financial decisions. Speaking to your loved ones about your wishes could allow them to make long-term plans.
However, it’s important to note that inheritances cannot be guaranteed. Changes to your circumstances could mean the inheritance is less than expected, so they should consider this.
Share your financial experiences and goals
Sharing your money experiences, both the positives and the negatives, can be powerful. It can be a way to pass on the knowledge you’ve amassed and encourage good financial habits.
It’s also an excellent opportunity to talk about the legacy you want to leave. If you have a clear idea about how you’d like your loved ones to use the wealth you’re leaving them, talking about the reasons why could mean they’re more likely to uphold your values and make decisions that align with your wishes.
As well as talking about your goals, take the time to understand theirs too. Listening to the challenges they face and their aspirations could help identify ways you might be able to offer support.
Create an intergenerational financial plan
If you currently manage your finances completely separate from your beneficiaries, you might want to consider creating an intergenerational financial plan that involves them.
An intergenerational plan may establish ways to improve tax efficiency and support the long-term goals of each person. It’s also an excellent way to introduce your loved one to financial planning and working with a professional if they don’t already, which may mean they’re better prepared for the great wealth transfer.
An intergenerational financial plan doesn’t mean you have to involve your beneficiaries in all your financial decisions or share the details of every asset; you can tailor the approach with your financial planner to suit you.
Contact us to talk about your estate plan and prepare the next generation
If you’d like to review your existing estate plan or discuss how we could work with you to financially prepare the next generation, please contact us.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate wills, trusts, Inheritance Tax planning, or estate planning.