What age is the right time to inherit?

When it comes to helping younger generations achieve their financial goals, it can be difficult to know the right time for them to inherit their wealth.

Receiving a windfall of cash or assets can derail even the most level-headed individual. The risk is that gifting an early inheritance out of wealth which you have carefully nurtured could leave it being inappropriately spent, eroding its potential. On the flip side, you may be cautious about holding onto the wealth, particularly when passing on a large estate in one go which can create an unnecessary Inheritance Tax (IHT) bill. This is especially relevant now that pensions will be subject to IHT from April 2027.

In this article, we discuss the right time to pass your wealth onto your children and grandchildren to help you feel confident in your gifting.

The question of maturity

When it comes to establishing what’s the right age to inherit, character is certainly a factor. In purely simplistic terms, some of us are happier saving, and others spending. One of the best places to start is to consider how those inheriting deal with their own finances – can they handle a sizeable sum? If they are young, it may be that peers have a significant impact on their decision-making ability and even encourage irresponsible spending. This can be particularly true if someone inherits a sum in their late teens or early 20s, when activities such as university, socialising or travelling might be the main priorities.

Even if your children or grandchildren assure you they can handle an inheritance, the reality might be a different story. Ultimately you know them best. It can be useful to consider how you dealt with money at the same age and how you’ve raised your children where the subject of money is concerned. Financial attitudes are often passed on between generations and money habits are generally created in childhood by what we see and experience around us.

Determining when your children or grandchildren are mature enough to inherit is subjective; one of the reasons why many trust funds are set up to pass on inheritances at a particular age or at an important life stage such as buying their first home. This can help avoid younger beneficiaries being at an age where they may not be as responsible with their inheritance, however again this is subjective and will depend on the individual themselves.

There can also be some other forces at play which you might like to take account of. For example, if your children are married, but divorce may be on the cards, you may want to protect your family wealth, as far as possible, from being drawn into a financial settlement. 

It’s possible to gift money into trust and not stipulate an age that your beneficiaries will inherit. Instead, it would be up to your chosen trustees to decide when is the best time for them to inherit, taking into account their individual circumstances and financial maturity at the time. This is known as a ‘discretionary trust’.

Work and Inheritance

Inheriting too early can also affect a young person’s working patterns and career decisions. If your child or grandchild is in the early stages of their career, they might still be exploring their options and are likely to be at the lower end of the salary scale. Injecting wealth into the equation may mean it’s easier for them to opt-out of this career path and should be something that’s considered. A certain amount of money can facilitate a lifestyle, perhaps enabling them to buy a property, set up their first investment portfolio or take some time to travel. But a large inheritance can also create its own issues, maybe offering an option not to work.

Even if wealth is used wisely – perhaps to buy one or more properties – there will be a need for a degree of responsibility to come into play to manage the situation professionally, handle bills and maintain the property. Don’t forget too that receiving wealth early on can impact their tax position, and it might be that there needs to be some careful planning needed for both you and your chosen beneficiary. Progeny offer a multi-generational financial planning service, where our team of professionals can be on hand to advise the next generation to help further protect family wealth and support your family over many years.

Sharing your plans

It’s always important to let your family know your plans, and to factor in your own financial requirements. If you’re not comfortable trusting your hard-earned wealth to younger generations then sit tight and think again in a few years. Whenever you are gifting or bestowing a large sum it’s vital that you’ve made sure your financial position will remain comfortable. Set the right expectations too – for example do your children or grandchildren expect to receive the funds to help them with house deposits, or have you made it clear they have to save their own funds, or that you’ll match what they contribute?

The best age to inherit

The best age to inherit really does vary between families and individuals. If you are looking for an ideal time, it’s more likely that someone in their mid-20s will be able to act responsibly, although of course this differs by person. As a young adult they are also more likely to need financial help with life events such as buying home and starting a new family, compared to waiting until inheriting on an estate when they may be older and more established. It is often the case that individuals want to be alive to see their inheritance make a difference and provide it when it is really needed.

One of the best steps you can take to help your children be financially mature is to be a good role model and teach them the importance of properly managing money. A financial planner can offer guidance and be involved in conversations with clients and their children to steer them in the right direction for investing.

Estate Planning

When planning any aspect of estate planning don’t forget to consider tax. Inheritance Tax can create an unnecessary and unwelcome bill but can be mitigated. Next year will be a key time to manage additional liabilities created when pensions come into the Inheritance Tax regime. It can also be useful to stagger inheritances to help your children or grandchildren develop important financial literacy skills. Trusts can help properly manage your plans and other tools – such as paying into their pensions – and can also be used to disperse inheritance, in a sensible way.

To discuss any aspect of estate planning please get in touch with your nearest office.

The Financial Conduct Authority does not regulate will writing and some forms of estate planning.