20 September 2023
Wealth management covers various topics such as investments, budgets, insurance, retirement and inheritance tax. However, one topic rarely discussed is that of intergenerational wealth, the passing down of your assets in a controlled and sensible manner. Are your children prepared to inherit a significant legacy?
In this article, we will look at the subject of intergenerational wealth and how it can be transferred, enhanced and preserved for the future.
As the term suggests, intergenerational wealth covers the passing of assets from generation to generation. While this would typically include housing and investments, for many people, it may also involve the passing down of a family business. One of the challenges is the changing opinions of different generations and their attitude to money, investment and society.
Wealth management, in general, involves the setting of short, medium and long-term financial goals together with wealth preservation. Many people think wealth management is about enhancing investments when asset protection is just as important, potentially more important in your later years. This then brings us to the matter of legacies, how to distribute them and how to control them.
In a perfect world, children would be introduced to the world of finance at a relatively early age, preparing them for later life. The more comfortable they are discussing and thinking about finance and investment, the more natural this will feel as they get older. Only recently, the UK government announced plans to introduce finance into the school curriculum, looking to prepare young children and young adults for later life. Particularly in the world of finance, knowledge is potent.
When speaking with your wealth management advisers, you will find there are many ways in which you can transfer wealth. These include:-
· Gifting
· Trusts
· Estate planning
It is possible to begin the transfer of wealth while you're alive in the form of gifting and trusts. This will also help with long-term inheritance tax, a means of reducing your estate and, therefore, your potential inheritance tax liabilities.
A critical element of wealth management is monitoring regulation changes and making the appropriate adjustments to client portfolios. This may take in anything from capital gains to income tax, inheritance tax and more. Your wealth manager should be able to advise you about ongoing changes and whether they will impact your financial well-being.
This is why it is critical to review your investments, income, expenditure and broader financial situation at least once a year with your wealth manager. When it comes to tax relief and tax breaks, you can carry some of them forward while others are administered on a use-it or lose-it basis. Action taken today could significantly enhance your long-term wealth; action not taken today could decimate your legacy.
Whether you have specific knowledge in investment trading, broader financial services or general life skills, these can be invaluable to the next generation. It is a mystery why so many of us take this hard-earned knowledge to the grave, failing to pass it on to our children. Instead, many are left to learn from their own mistakes, potentially expensive mistakes, unused to what can be a significant inheritance.
While the situation is improving, many people still struggle to discuss finance within family circles. The next generation must be comfortable with finances and have a basic understanding, something to stand them in good stead. Considering that the average house in London is worth over £500,000, adding a few more investments and other assets, your children could be inheriting a significant legacy.
Are they prepared? Did you ever introduce them to your financial adviser/stockbroker? Have you made plans to help them with long-term wealth management?
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