£1tn is expected to change hands in the 2020s, known as the Great Wealth Transfer. Therefore, it is unsurprising that inheritance planning is an increasingly important part of wealth management, with such significant amounts of wealth and assets being passed down from baby boomers to younger generations.
Rising property prices, asset price inflation and frozen tax thresholds mean that more and more people are being dragged into paying inheritance tax (IHT), leading inheritance tax receipts last year to hit a record £7.5bn. What is more, given that this figure represents less than 1% of total tax revenues and was levied on only 4% of the population, a chancellor seeking to raise taxes to plug a £22bn fiscal black hole may find an IHT raid too tempting to turn down.
History suggests that preserving and growing intergenerational wealth is notoriously challenging, with 70% of US families losing their wealth within two generations and 90% losing it within three generations. Unfortunately, it is far too common for people to address this issue in the wrong place, focusing initially on what they invest in rather than their framework. Identifying investment goals, aim and timeframes is in our experience the best place to start, which then allows you to identify the optimal framework that will provide the bases and essential guidelines in managing your wealth.
Being proactive gives you the best chance of achieving your goals. Having discussions around death and legacy can be difficult, but it is far easier to talk about it when you are in a stable position in your life. Managing your finances and investing are often emotive, so it is far from ideal to have to make big decisions when you’re going through emotional distress linked to sickness or bereavement. Even high-level discussions with practical steps of who to contact if you become incapacitated can make the process far less painful.