Intergenerational wealth transfer

Are you and your beneficiaries prepared for an intergenerational wealth transfer?

The ability to leave an inheritance to your family after you pass away is a common goal for many. The assets you pass onto your children and grandchildren could set them up for the next stages in their lives. But how can you ensure your beneficiaries are ready to receive this money when the time comes?

This article will give you some tools you can use to ensure a successful intergenerational wealth transfer within your family.

Speak to a financial planner

The ‘Planning to pass it on’ survey raised some interesting statistics on inheritance planning. Only 17% of those who were planning to provide an inheritance to their family had a formal plan in place. Just 3% had worked with a financial planner on a strategy to transfer their wealth.*

To effectively transfer your wealth to the next generation, it’s essential you speak with an experienced financial planner. They will be able to navigate complex, ever-changing taxation laws and take a holistic view of your finances. They can also create a neutral and constructive space to conduct productive conversations on the topic of intergenerational wealth transfer within your family.

Communicate intent for an intergenerational wealth transfer

Of those surveyed, 53% of people expecting to pass money or assets on to generations below said they wouldn’t tell the beneficiaries the amount they will be receiving. 52% said they would not be telling their beneficiaries when they would receive it.

To help ensure that the inheritance you give is used appropriately and successfully, it is important to inform your beneficiaries of your plan as early as you can.

Having honest conversations with your family about when and how much money they will be inheriting can help them to make their own financial plans as soon as possible and with greater clarity. A financial planner can help to facilitate these difficult family conversations and advise your children or grandchildren on their own estate upon receiving the gift.

During these conversations, you can put forward your feelings on what you would like this inheritance money to be spent on so that your beneficiaries can have a clear understanding of your wishes.

Put it in writing

A ‘letter of intent’ or a ‘letter of wishes’ is a document that can give your family important information about personal and financial matters after your death. Unlike a will, these are not legally binding but can be an additional document to help you to communicate your wishes.

Alongside mediated family conversations, drafting a ‘letter of intent’ can ensure your intention for this inheritance is recorded in writing and better understood by your beneficiaries.

Use the flexibility of a trust

If you are looking for more control within the intergenerational wealth transfer process, a trust may be a good option for you. With a trust, you can customise the terms of an inheritance to release funds at an appropriate time, for example, when your beneficiaries reach a certain age or life stage.

With a discretionary trust, you can create provisions for different types of access. As the settler you decide who the trustees (people appointed to manage the trust) are and who the beneficiaries will be. The trustees will be able to use their discretion to decide if and when the beneficiaries you have named will inherit money or assets. If you are looking to leave an inheritance to your grandchildren or future grandchildren, a discretionary trust could be a good option.

With a discretionary trust you can also define certain types of distributions, so that the money can be used for education, support of a business, or any medical needs for example.

Plan ahead for your intergenerational wealth transfer

Creating a coordinated plan for giving and receiving an inheritance will help you to pass on wealth effectively when the time comes. With professional guidance and clear communication of your intentions, you can ensure your intergenerational wealth transfer is managed effectively, and that the next generation also has something to pass on in the future.

If you are seeking guidance on your family’s intergenerational wealth transfer or estate planning, please do get in touch with our team.

* Planning to pass it on, YouGov and Progeny survey, 2022
The information contained in this document has been taken from sources stated and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Tracey Evans

Associate Director, Wealth

Tracey is passionate about helping clients to see their ‘big picture’ and has been doing so for nearly 30 years.

Learn more about Tracey Evans