“As financial planners we have to respect that feeling, while at the same time trying to emphasise to clients that they may regret prioritising their children’s finances over their own.”
An adviser’s job to start with is to take a holistic look at a client's financial life and use cash flow modelling tools to show their client just how much they can gift to their children during their lifetime.
This model should still make sure that they have enough left to cope with any later life care bills and also to enjoy the retirement they have been looking forward to.
Following this, an adviser can lay out the various different ways their client can pass on their wealth to the next generation.
Gemma Harle, managing director of Quilter Financial Planning, says if a parent has older children who are in desperate need of a deposit to buy a property then it is a simple job, however, for clients with younger children, the parents may wish to protect their wealth from frivolous spending and choose to maintain a level of control over their gift by putting the money into a trust, for example.
Every family’s situation will be unique and an adviser can play an important role in creating a bespoke solution for their specific intergenerational planning needs.
It can be a delicate conversation and one where soft skills are really needed.
Ms Harle adds: “With any conversation to do with the flow of wealth through the generations an adviser’s soft skillset will need to be used so they can explain their financial plans in a succinct and easy to understand way.
"If done successfully, an adviser can benefit from the younger family members becoming clients in the future as they need help managing this newly found wealth."
Inheritance tax
For the most part, from an inheritance tax perspective, it is usually in the benefactor’s benefit to gift part of their wealth during their lifetime to avoid it becoming part of their estate.
However, there are some situations where it may not be the best course of action, such as if someone is suffering from a medical condition that may mean that they do not live for seven years following their gift.
“If you don’t survive the gift by seven years, the gift, which is a potentially exempt transfer becomes a chargeable consideration, and is added to the value of a client’s estate for IHT,” says Ms Harle.
According to her, this illustrates that a significant proportion of the population should be able to help their children in some way to get on the housing ladder.
