Conflicting money views mean 1 in 3 baby boomers are reluctant to leave an inheritance
By Charles Smith
Research has found that older generations worry about leaving money to children or grandchildren because of different views about money. Generational differences can make inheritance planning more complex, but there are things you can do to improve your peace of mind.
According to a survey from abrdn, 32% of baby boomers are reluctant to pass on wealth to someone with a different attitude to money.
Across the entire population, people prioritise making financial sacrifices for their future wellbeing rather than spending to achieve short-term goals. However, younger generations are more likely to focus on the here and now.
39% of Generation Z, who are aged under 23, are more likely to make financial decisions to enjoy their life now, instead of putting money away for the future. As many in this generation are unlikely to have large financial responsibilities, such as a mortgage or raising a family, the short-term outlook isn’t surprising.
In contrast, just 22% of baby boomers take a short-term outlook, and perhaps had a very different approach to money when they were younger than Generation Z.
So, different attitudes to money could mean you have concerns about passing on your wealth to younger family members. With 90% of people planning to pass on money during their lifetime or through an inheritance, it’s something many people will need to consider.
Here are four things you can do that could put your mind at ease.
1. Speak to your family
If you have concerns, your first step should be to speak to your family.
While it may seem they spend money frivolously, perhaps they have a savings account, investment portfolio, or are contributing to a pension that you don’t know about. Your concerns could be based on a snapshot of their financial habits, rather than the bigger picture.
A chat about money could also highlight some of their long-term goals that you may want to help with, such as buying property or furthering their education.
A conversation could help them create a long-term financial plan too. Research from Zoopla found that 6 in 10 people are relying on an inheritance to move, upgrade their home, or pay off their mortgage. Yet, just 30% have talked to their parents. It could mean some families are making unrealistic plans based on an expected inheritance they may not receive.
2. Pass on wealth during your lifetime
More than half of people plan to pass on wealth during their lifetime, the abrdn survey found.
This could give you greater control over how it’s used. For instance, you may decide to gift a property deposit, but hold on to the money until your child or grandchild has exchanged contracts. It also provides an opportunity to tell them how you’d like them to use the money and why, so they can understand your point of view.
Remember to consider your own long-term financial security if you want to make gifts during your lifetime.
3. Use a trust
A trust means you can put money or assets aside for someone and set out how and when they can be used.
You would name a trustee, who would be responsible for managing the assets in line with your wishes and on behalf of the beneficiary.
A trust is often used to pass on assets to children or vulnerable adults, but they can be useful for protecting wealth for future generations too. You may, for instance, state the beneficiary cannot access the assets held in the trust until they are 25. Or that the beneficiary can receive an income from the assets in the trust, but not manage the assets.
You can use a trust to pass on assets during your lifetime or when you pass away.
Trusts can be complex, so seeking legal advice to ensure it achieves your aims could be useful.
4. Involve them in the financial planning process
Involving the next generation in the financial planning process could help put your mind at ease and support long-term goals in your family. In fact, the abrdn research found that 87% of financial planners also have a relationship with their clients’ children or grandchildren.
Involving your family in your financial plan doesn’t have to mean they know all the details; you can choose what you share.
If you’d like to talk about passing on wealth to younger generations and helping them improve their long-term financial security, please get in touch.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning or trusts.