Passing on your wealth to the next generation. Things to consider.

March 1, 2023

No-one really wants to have this conversation, but it’s an important one. Especially now, with more people’s estates than ever being subject to Inheritance Tax thanks largely to rises in house prices and frozen tax allowances.

If you want to pass wealth on to your children and grandchildren, it’s wise to think about when might be the best time to make that gift. Should you wait to transfer wealth after your lifetime—or start earlier?

At Talis IFA we take the view that transferring your wealth is not just about preparing the money, but also about preparing the family. Although everyone’s circumstances, needs and wants are different, we do find that, when we speak to our clients about this sensitive subject, similar issues emerge.

We wanted to share some of our thoughts with you, to help you think about how to approach these tricky decisions.

There are several compelling reasons NOT to give away your wealth during your lifetime.

You might be concerned that transferring substantial amounts could mean you might not have enough later to maintain your lifestyles.

You might also worry that your beneficiaries might not use the wealth wisely, (or at least not how you’d want it used) or be concerned about your wealth leaving the family because of divorce.

Even the closest families find it difficult to talk about, but the fact is that by talking about it now, and putting plans in place, you’re more likely to pass on your assets in a tax-efficient way which also helps out your family.

We take the view that, although minimising future Inheritance Tax is important, it’s your money. We’ll talk you through options, and help you make plans that benefit you and your beneficiaries.

If you decide that it’s time to start passing on your wealth, we’ll help you to understand your options.

 

Transferring your wealth to the next generation

Depending on the value of the assets involved, transfers made during your lifetime may be subject to Inheritance Tax.

Gifts made more than seven years before your death are usually exempt from Inheritance Tax.

The value of assets can change over time, so it’s important to consider this when making a transfer. For example, property values can go up or down, and investments can become more or less valuable.

Your personal circumstances will also play a role in deciding when to make a transfer.

For example, if you need access to the money yourself, then it may not be the right time to transfer wealth to your family.

Alternatively, if you’re looking to pass on your business to the next generation, then you’ll need to consider when is the best time for them to take over.

 

Things to consider

There are a number of things to take into account when deciding on the best time to transfer wealth to your family.

• your age: If you are younger, you may have more time to accumulate assets and grow your estate. But if you are older, you may want to consider transferring wealth sooner rather than later in order to maximise the amount that can be passed on to your beneficiaries.
• the age of your beneficiaries: If they are young, they may not need the money immediately and it can be used to help them further their education or buy a property. However, if they are older, they may need the money to support themselves in retirement.
• the value of your estate: If your estate is large, transferring wealth sooner rather than later could minimise Inheritance Tax liabilities. However, if your estate is small, you may not need to worry about Inheritance Tax and can afford to wait until later in life to transfer wealth.
• the types of assets involved: this is an important consideration. Liquid assets (such as cash or investments), can be transferred quickly. But assets like property take longer, so need more planning.

You’ll also need to consider your own personal circumstances (will transferring assets now risk leaving you short of money later?) and the tax implications of your decisions.

 

Sharing your plans

As we’ve already recognised, talking about what will happen after your death isn’t easy for many families. But it is important that you have this discussion with them sooner rather than later.

Transferring wealth to the next generation is an ongoing process – and it is extremely important to keep talking as a family. The decision about when to transfer wealth to your family is also an intensely personal one. Once you have an idea of what you want to do, it’s wise to take professional advice so that you fully understand the implications.

We’d be happy to talk to you about your plans and options. Please get in touch.

 

The Financial Conduct Authority does not regulate taxation and trust advice and will writing. Trusts are a highly complex area of financial planning.

Information provided and any opinions expressed are for general guidance only and not personal to your circumstances, nor are intended to provide specific advice.

Tax laws are subject to change and taxation will vary depending on individual circumstances.