Intergenerational planning is a way for families to use their collective wealth to support one another during their lifetimes. Traditionally, wealth has passed from one generation to the next upon death. Intergenerational planning takes a different approach and allows families to pass on their wealth, and alleviate financial disparities amongst different generations, here and now. It uses holistic financial planning strategies to make the best use of intergenerational wealth, creating much longer and more robust saving and investment strategies that can pass through the generations. In this way, intergenerational planning is much more than just Inheritance Tax planning, although this is an important element.

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In this article, we’ll look at why intergenerational planning has become more popular in recent years and what this holistic financial planning approach can look like.

Wealth disparity across the generations

The major factor that has brought about the increased popularity of intergenerational planning is the misbalance of wealth within families. The majority of assets sit with 55 to 65 year olds – the baby boomers – while the generations before and after this have had an increasingly difficult time financially with regard to wages, house prices, care costs, student debts and disproportionate cost-of-living increases. This has led to a challenging dynamic in families where those most in need of wealth are at the two opposite ends of the generational spectrum.

Families have also increasingly changed structure. As people continue to live longer, there can now be four or even five generations of a family alive at once. And divorce and remarriage also mean families have grown outwards, making the lines of succession much more complicated.

This is where intergenerational planning comes in. By assessing collective wealth, families can decide how to use their assets more collaboratively to support each other during their lifetimes, whilst also passing on wealth in the most effective way.

Why you should approach intergenerational planning now

This moment in time is particularly important when it comes to intergenerational planning.

With increased changes in family structures, family dynamics have become more complicated. This is why planning ahead to ensure a smooth transition of wealth between generations needs to be approached sooner rather than later.

As baby boomers are now approaching, or have recently started, their retirement, younger generations will be set to inherit £5.5 trillion from the assets of their parents and grandparents over the next 25 years. This is an unprecedented release of personal wealth that needs to be planned for to make sure it is passed on in the most tax-efficient manner and in line with an individual’s personal wishes.

What does intergenerational planning look like?

Effective intergenerational planning is holistic in approach. This means it moves away from individual wealth management, or dealing with finances in a segregated manner, and instead combines different financial planning strategies to the best effect.

Here is an outline of what intergenerational planning can look like for different generations.

Intergenerational planning for parents and grandparents:

  • Reviewing existing savings, investments and pensions to assess their continued suitability
  • Assisting aging parents or grandparents with their financial decision making
  • Helping to plan for care fees for parents and grandparents
  • Discussions on inheritance tax and estate planning
  • Making sure Wills and Power of Attorney rights are kept up-to-date

Intergenerational planning for children and grandchildren:

  • Helping children and grandchildren understand the importance of saving for the future and assisting in long-term saving and investments, such as a Junior Pension or ISA
  • Assisting in school/university fees
  • Helping the younger generations to buy their first property
  • Providing financial support for children in the event of parental death

Why it’s important to speak to a specialist financial planner

There are many considerations to take into account when it comes to intergenerational planning and each plan must be uniquely tailored to your family’s needs and financial goals. It is, therefore, important to speak to a specialist financial planner to get independent advice on what strategies will work best for you and your family.

PLEASE NOTE: Grosvenor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. The value of investment can go down as well as up and you may not get back the original amount you invested. Tax treatment is dependent on individual circumstances and may be subject to change. Tax planning is not regulated by the Financial Conduct Authority.


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