The death of inheritance?

  • Bella Edmunds
  • 06 April 2023
  • 5 mins reading time

For parents and their children, two of the hardest things to discuss can be what happens in the devastating event of losing a parent, and talking about money. This means that discussing inheritance is doubly hard! But what if passing on your wealth to your family didn’t only have to happen when you die – could this make the conversation easier?

Traditionally, the process of intergenerational wealth transfer happens as inheritance. This can come with the cost of inheritance tax, but it also comes with the cost of not enjoying seeing your loved ones benefit from the financial help you have given them.

So why not consider passing on some of your wealth during your lifetime? Of course, you will need to plan carefully for what you can afford and are allowed to gift (as there are limits), and what you need to support your own lifestyle, as well as planning for any unforeseen events.

A little goes a long way

Gifting money to loved ones while you are still alive will inevitably mean smaller amounts of money are gifted. At face-value, this might feel like you are giving less than might be the case upon death, but it’s not all about money, it’s also about timing. Waiting until the end of your life to pass on your wealth could mean your children have already been through their own significant life events where some financial help could have really made a difference. A deposit for a first home, buying a bigger car to cater for a growing family, or even retiring early are all things that your children may experience while you are still around. So,, it could make sense to consider giving a little to help when the time is right, rather than waiting to give more further down the line, if you want and are able to.

Read more on passing on your wealth and gifting allowances: 10 ways to pass on your wealth

Tackling the taboo

Talking about money matters with family members can be hard. Talking about money in relation to death is especially hard. But discussing money around happy events such as securing a place at university or getting on the property ladder could help to tackle the taboo of financial disclosure. Parents don’t need to go through the entire ins and outs of their financial affairs if they only need to pass on a relatively small proportion of their overall wealth.

Discussions with children about how much extra help they may need in their first year at university, also need to include consideration about how much you can afford to give while still paying into your pension and maintaining your own standard of living. But these types of intergenerational wealth transitions tend to involve much smaller amounts than estate planning, and so are likely to be much less of a major decision.

It also means discussing money in relation to an exciting next step for your family, which should be a positive thing – you might even enjoy talking about it!

Making family finance chats the norm

By starting small, you may be able to pass on your wealth more regularly. Each year at university, a new house, a new car, a wedding day, your first grandchild… are all events where you can discuss finances and work out what help you want and can afford to give.

Each time you talk about money with your family will likely become easier so it will feel less of a taboo subject, and instead could become the norm.

You may even get to the stage where you feel comfortable enough to include your children in your discussions with your financial adviser.

A smaller estate still needs planning

It would not be sensible to give away all of your wealth while you are still alive! Therefore, we are unlikely to see ‘the death of inheritance’, but if you do enjoy gifting your wealth to your family throughout your lifetime and can afford to do so, then your estate at the end of your life will be smaller. But estates of any size still need planning for the best way to manage matters most efficiently, and will still require conversations with your loved ones.

If your family have already been attending meetings with you and your adviser early on in your life, this could really help prepare for the always difficult conversation about what happens when you die.

Important information

The value of investments and pensions and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or part) without our prior written consent.

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