Inheritance Tax  

How can advisers close the wealth transfer generation gap?

  • Identify why intergenerational communication is key.
  • Describe the role of the adviser when it comes to wealth transfer.
  • List the possible solutions when advising on transferring wealth between generations.
CPD
Approx.40min
How can advisers close the wealth transfer generation gap?

There is a gap in perceptions about how and when wealth will be inherited.

Owners of capital, who tend to be the older generation, do not realise the extent to which a delay in transferring wealth impacts the lives of other family members.

According to a survey produced for Killik & Co, under 35-year-olds are holding back from making major life decisions – whether that be buying a home, starting a family or dealing with debts – until capital is unlocked for them through the inheritance of their parents’ and/or grandparents’ estate.

Worryingly, the survey also shows a disconnect between the expectations of younger and older generations when it comes to wealth transfer, finding that only 7.6 per cent of over 65s plan on passing on the majority of any inheritance during their lifetime.

In contrast, twice as many (13 per cent) of under 35s expect to receive their inheritance during the lifetime of their older family members.

This disconnect is a clear indicator of lack of communication.

As in so many other scenarios, when it comes to wealth transfer, communication is key.

Intergenerational communication will be explored further in this article. In addition, the article will talk about the role of the adviser in this context, as well as the areas that should be considered when advising on transferring wealth between generations and possible solutions.

Communication is key

While the survey found that three quarters (73 per cent) of those expecting to receive an inheritance believe it is essential for their financial security, it also showed that families are often avoiding the inheritance conversation.

Just 21 per cent of those due to inherit wealth believe a conversation about inheritance between themselves and their elder family members has taken place.

Only 40 per cent of grandparents and parents feel that they have discussed the arrangements for their estate.

In most cases, both the older and the younger generation find it equally difficult to initiate a conversation about wealth transfer and inheritance.

Understandably, the older generation does not want to think, let alone talk, about their own demise, whereas the younger generation is afraid of looking greedy.

As a neutral person, an adviser can help clients to start the conversation – for instance, many clients find it easier to say that their adviser suggested they have a family meeting.

Even if someone in the family has managed to initiate the conversation, conflicting objectives, attitude to money and emotions can still cause difficulties or bring an abrupt end to a family meeting.

This is something to bear in mind as different conversation models will work for different families. For example, some families may wish to have an adviser present at the meetings, others may wish to have an open family discussion without a third party attending.

CPD
Approx.40min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What percentage of over 65s plan to pass on the majority of any inheritance during their lifetime?

  2. True or false? "Just 21% of those due to inherit wealth believe a conversation about inheritance between themselves and their elder family members has taken place."

  3. The author says the role of the adviser is to also be a what?

  4. The author lists four wealth transfer solutions. But which of the below is not in that list?

  5. According to the author, it could be more IHT-efficient to pass assets directly to who?

  6. Which organisation recently published the 'IHT Review: Second Paper'?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify why intergenerational communication is key.
  • Describe the role of the adviser when it comes to wealth transfer.
  • List the possible solutions when advising on transferring wealth between generations.

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