Intergenerational wealth planning refers to the strategic approach of managing wealth, assets and financial decisions to ensure that future generations are supported and benefit from a legacy. It goes beyond just leaving assets to family members; it focuses on creating long-term plans that preserve wealth, minimise tax liabilities and address the needs of multiple generations.
Intergenerational planning is an essential part of wealth management for families looking to provide financial security and stability for their descendants, while also considering the broader family dynamics and values.
Intergenerational planning ensures that wealth is passed from one generation to the next in a tax-efficient manner. This involves considering mechanisms such as wills, trusts and gifting strategies to minimise inheritance tax (IHT) liabilities. For example, using trusts can help mitigate IHT and protect assets from being reduced in value due to taxes when passed on.
Effective estate planning includes decisions around how assets, such as property, investments, and business interests, are managed and allocated upon death. This often involves setting up trusts, family businesses, or succession planning to ensure that the family’s wealth remains intact and is passed on according to their wishes.
A critical aspect of intergenerational planning is minimising taxes, especially IHT. Strategies like making gifts, investing in Business Property Relief (BPR) or Agricultural Property Relief (APR), or using life insurance policies to cover potential IHT liabilities can be employed to ensure more wealth is preserved for future generations.
Business Property Relief Schemes (BPR) invest in assets that are high risk and can be difficult to sell such as shares in unlisted companies. The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.
Intergenerational planning also focuses on imparting financial literacy and values to younger generations. Educating heirs about managing wealth responsibly is key to ensuring that future generations are equipped to handle inherited assets wisely, preventing potential financial mismanagement.
Many families incorporate charitable giving into their intergenerational planning, using trusts or foundations to ensure that their wealth benefits causes they care about. This can also help reduce the overall IHT burden while leaving a lasting legacy.
Intergenerational planning is not only about wealth transfer but also about ensuring that future generations are financially equipped and prepared. It’s a holistic approach that balances wealth preservation, tax efficiency, family values, and education, creating a framework that supports long-term financial stability and legacy.
If you have any questions regarding intergenerational wealth planning please get in touch with our team of qualified financial advisers for a no obligation chat.
The London Stock Exchange was opened by Elizabeth I in 1571.
During the 17th century, stockbrokers were not allowed in the Royal Exchange due to their perceived rude manners they instead operated from other establishments in the vicinity, notably Jonathan’s Coffee-House.
Yes, open conversations about areas such as wealth transfer, estate planning and financial goals help ensure smooth wealth succession and prevent misunderstandings in the future.
At Digby Associates we regularly provide intergenerational financial advice working together with family members to help them meet their own individual financial goals as well as ensure create a structured financial plan to enable a smooth and tax-efficient transfer of wealth throughout the generations.
You can use strategies such as gifting within the annual allowance (£3,000 per year tax-free), placing assets in a trust, contributing to a Junior ISA or pension for children, or using Business Relief-qualifying investments to reduce inheritance tax (IHT).
Inheritance tax is charged at 40% on estates over the £325,000 threshold (£500,000 if passing to direct descendants). Using trusts, gifting, and life insurance policies can help mitigate IHT liabilities.
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The most appropriate investments to transfer wealth will depend on your individual circumstances and you should work with a financial adviser to put in place a suitable strategy.
Tax-efficient options that could be included are pensions (which can be inherited tax-free in some cases), ISAs (which beneficiaries can inherit via an Additional Permitted Subscription), and investments that qualify for IHT relief, such as AIM shares.
Alternative Investment Market (AIM) invest in assets that are high risk and can be difficult to sell such as shares in unlisted companies. The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.
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