Working with YouGov, we recently undertook a national survey on intergenerational wealth transfer.
We wanted to understand more about the plans people have around inheritance and transferring wealth across generations, how the generations communicate about it and how they feel about the issue.
The results informed our report, ‘Planning to pass it on’, uncovering national attitudes on intergenerational wealth transfer.
The aim is that this will help us to understand what our clients need from us and how we can support them in their plans to leave or pass on wealth to their families.
The research explored five key areas – intention, communication, emotion, expectation and aspiration – and spoke to three generations (Baby Boomers, Gen X and Millennials).
It delivered some interesting results, some we expected and some that were more of a surprise. We also saw the impact of the current cost-of-living crisis clearly reflected in the responses.
The majority of respondents said they intend to pass on something to the next generations of their family, with 60% planning to do so.
However, of those aiming to provide financial support or inheritance to loved ones, the majority questioned (49%) didn’t know, beyond that, how they might do it.
25% said they only had a rough idea of details, like who the beneficiaries would be and the amounts they would give them.
The difficulty of communicating on such a sensitive topic was a consistent theme in the research. The majority of Millennials and Generation X (41%) found it ‘uncomfortable’ to discuss inheritance and wealth transfer with their parents.
When those who found it uncomfortable were asked what would make it easier, by far the biggest proportion (67%) said ‘nothing, it will always be difficult’.
58% of Baby Boomers said they have discussed inheritance or gifting with loved ones, leaving 42% who had yet to do so. Of those who hadn’t had the conversation, 37% said they don’t ever envisage discussing this with their loved ones.
Even amongst those who did expect to one day talk about passing on money to the generations below, the majority (53%) said they wouldn’t tell the beneficiaries the amount they will be receiving it.
Amongst those expecting to receive an inheritance, when asked how they were planning to use this money, the most popular answers were to build their savings pot (35%), fund retirement (29%) or pay off their mortgage (25%).
1-in-10 said they intended to use it to leave a further financial gift in their will for their family.
Nearly two-fifths (38%) of those expecting to receive an inheritance did not know the amount they would be receiving.
When asked if they factor the amount of any expected inheritance or gift into their own financial plans, only 19% said they had, while 68% said they had not.
Short and long-term aspirations
There was clear evidence of the impact of the cost-of-living crisis in the immediate financial goals of the survey respondents.
When asked to rank their top current financial goals, the highest proportion (45%) said ensuring they meet regular financial commitments was their top aim, followed by 35% who wanted to have enough cash in case of emergencies and 29% who were focused on saving enough to enjoy retirement.
However, when asked to focus on their longer-term financial aspirations, intergenerational wealth transfer figured far more prominently, with 46% hoping to gift money while they were alive to their children or grandchildren and 45% aiming to leave a gift in their will.
Amongst their financial challenges over the next 10-15 years, the second most popular answer (30%) was a concern over the amount of Inheritance tax their children may have to pay.
Better outcomes for everyone
This research has given us an illuminating snapshot of national attitudes towards inheritance and intergenerational wealth transfer today.
Transferring money to the next generation is an ambition for many, yet not enough people are planning seriously for it. This creates risk and missed opportunities for those on both sides of the wealth transfer.
In the years ahead, we will see more families having more complex requirements when it comes to passing on their wealth to the next generation. Some may be the first generation of their families to need to plan for intergenerational wealth transfer or prepare for considerations like Inheritance Tax.
Addressing the issue as a family is likely to lead to better outcomes for everyone. Financial planners can create a safe, neutral and constructive space to foster productive conversations around finance in general, but particularly on the topic of intergenerational wealth transfer.
Better communication, in turn, can lead to more clarity and transparency in the intentions of both sides of the intergenerational wealth divide – those giving and those receiving – helping to restore higher levels of trust between the two.
Creating a joined-up, coordinated plan for giving and receiving an inheritance will help the older generation to pass on wealth effectively when the time comes and ensure today’s younger generations have something to pass on in future.