Generational Wealth is something many families strive to achieve. Passing assets down through the family and across generations.
As home ownership becomes more expensive, tax rules change and stock markets fluctuate, more families are thinking about how to pass on their wealth to younger generations. If you’re looking to do just that, this article should help to give you some guidance.
WHAT IS GENERATIONAL WEALTH?
Generational wealth refers to any assets which move from one generation to another – usually from parents to children or grandchildren. Generational wealth can include property, money or investments and can also encompass more intangible things like good financial literacy.
It’s a lot more common for people to want their hard-earned wealth to be protected and passed down to family members, and many are keen to leave a generous estate to their beneficiaries.
The importance of generational wealth
Providing a financial legacy can create stability and financial security for your children. This could mean they have more options available to them such as owning property, setting up their own business venture, education or travel. The concept of financial freedom can become a very tangible reality when generational wealth is a factor.
The challenges of building generational wealth
One of the key challenges of generational wealth can be a lack of communication between parties that lead to quickly depleted or misused funds.
It is said that family wealth doesn’t often survive three generations[1]. Imagine working hard, saving and investing regularly and building wealth to pass on. Your children benefit from this wealth, using it to support their lifestyle and value it, witnessing the effort it took you to build that wealth. Your grandchildren however, may not place the same value on it and without careful planning or communication, that wealth can quickly disappear.
It’s vital to have a financial plan and to clearly communicate it to your family to ensure they understand your aims and ambitions, as well as manage their own wealth once inherited.
Setting up a Trust in which you, your children and grandchildren can be involved in will help protect family wealth by creating the right structure for your assets. It’s no surprise that having an up-to-date Will in place is vital too – ensuring that the people who you want to inherit these assets will do so, and in a tax-efficient way.
Finding a good strategy to help build and maintain generational wealth is the key. To help with this, it’s important to build good habits and teach powerful lessons about the value of money to younger generations.
Investing in children’s education
As well as ensuring your child has a strong academic education, remember to teach them about money too. Having open conversations about money and teaching children the basics of saving and investing can stand them in good stead for the future, ensuring they properly appreciate wealth when it reaches them.
The stock market
Investing in the stock market offers the opportunity to build wealth and protect your money from inflation. Investing is a long-term strategy, and over time can prove very effective. Getting started can be intimidating, but working with a good financial planner can help you to understand your objectives such as a desire to build wealth for your children and grandchildren and your attitude to risk.
Property
Buying property can be a very effective way to build generational wealth. Property prices in many parts of the world have risen over time, and as a tangible asset, property can also be passed down as part of your portfolio.
Generational business
A family-owned business can play a significant part in any generational wealth plan. Building a business which can be passed down and run by future generations creates valuable income and a strong family legacy which future generations could be eager to protect.
There are some very practical advantages too – business relief can make these a very tax-efficient way of sharing family wealth.
Life insurance
Life insurance can help ensure that generational wealth isn’t impacted if the worst should happen. Making certain it’s in place means that younger generations have a safety net if something should happen to you, which could otherwise jeopardise family wealth.
Build generational wealth with Progeny
Our experts can support with all aspects of financial planning, including putting the right framework in place to help you build wealth and effectively share your assets with younger generations. Contact us today to discover how we can help you and your family.
[1] Securing generational wealth: strategies for a lasting financial legacy, LV, 2025.
Important Note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only. This communication does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs.
The opinions stated in this document are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Please note
Tax treatment depends upon individual circumstances and is based on current UK tax legislation, that is subject to change at any time.
Past performance is no guarantee of future performance.
The value of an investment and the income from it can fall as well as rise and investors may get back less than they invested. Your capital is therefore always at risk. It should be noted that stock market investing is intended for the longer term.
