10 Steps to Protecting Intergenerational Family Wealth

£5.5 trillion.*

That’s how much wealth in inheritance and financial gifts it’s estimated will pass between the generations over the next three decades.

A perfect storm of low interest rates, property prices and pension reforms has certainly contributed.

For example, average house prices have been rising. Office for National Statistics (ONS)** figures show this trend continued into 2021 as the UK average house price for August 2021 was £264,000, up from £257,000 in July 2021, following June’s record level of £265,000.

For many families, that presents an opportunity, as well as a challenge. Without careful planning, inheritance tax could be a threat to family wealth. That in mind, here are ten steps to help protect that wealth —

  1. Speak to a lawyer. Ensure your wills are up-to-date and clearly state your wishes.
  2. Ensure you have power of attorney in place. In Scotland there are continuing and welfare powers of attorney (PoA). Continuing PoAs gives your attorney the power to do everything you can do in terms of property and finances if you lose mental capacity. The welfare PoA deals with health and welfare.

  3. Speak to your family about your financial affairs. If you would prefer not to divulge too much detail introduce your family to your professional advisers so they know who to turn to after your death.

  4. Engage a financial planner to build a lifetime financial model, tailored to your financial situation, and incorporating your objectives and family values.

  5. Know your inheritance tax (IHT) liability. Everyone has a nil rate band of £325,000 depending on circumstances. Other tax relief, such as residence nil rate band may be available. A financial planner can help identify your liability and is the basis for formulating a mitigation strategy.

  6. A financial planner can help you identify possible future long-term care fees and the financial implications for you.

  7. Consider gifting capital to loved ones during your lifetime. There are several types of trusts available, and a financial planner can advise on the right choice for your circumstances.

  8. Trusts may also be an option, with the right advice, if you have any concerns regarding the recipient of a gift, perhaps due to their age, responsibility, or their relationships.

  9. Over the course of the year, payments from regular income can be made into Junior ISAs for children/grandchildren up to the value of the JISA allowance for each child (£9,000 in 2021/22).

  10. Last and certainly not least — enjoy life! Increasing your expenditure and making memories for your future can also reduce the value of your estate that may eventually be subject to inheritance tax.

Sources:

* Kings Court Trust, 2021. Inheritance Economy. Available from: https://www.kctrust.co.uk/wealthtransfer

** Office for National Statistics, 2021. UK House Price Index. Available from: https://www.ons.gov.uk/economy...

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