Intergenerational planning: the how, what why, where and when?

Intergenerational planning acknowledges the connection between family, society and time. It recognises that by strategically and thoughtfully managing, structuring and transitioning  assets across generations, the quality of life for both current and future generations can be improved.

The concept is gaining in popularity as a means of protecting and preserving wealth as our society evolves. One in three families is now considered to be blended, which introduces complexities into inheritance. Family businesses constitute 90% of all private firms in the UK, and many may want to thrive over multiple generations. At the same time, HM Treasury collected £1.2 billion in inheritance tax in the first eight weeks of the 2023/2024 financial year, up 13% on the same period in the previous year, indicating that more estates than ever exceed the threshold for payment.

Why consider intergenerational planning?

At the core of intergenerational planning lies the desire to pass down financial assets and also, in some cases control, wisdom, values and traditions. By instilling core values and ensuring a strong moral compass for successive generations through the fostering of a sense of responsibility and connection, it allows families to create an impact that extends far beyond their lifetimes.

When should you start intergenerational planning?

Begin your planning now. We are often approached too late in the day to plan as effectively as possible for clients, typically because the event they seek protection against, such as a marriage, divorce or death, has already happened.

Whether you are a young family looking to set a plan for future generations or an older family seeking to solidify your legacy, early planning provides the advantage of time. Starting early enables you to gradually accumulate wealth, plan and react to change (in whatever form it takes). It also allows you to foster open communication, which can be important where a party may be disappointed or surprised by a decision that has been made.

What can intergenerational planning cover?

Financial stability

Financial stability is a cornerstone of intergenerational planning. It involves assessing current financial resources, creating strategies for wealth accumulation and preservation and establishing mechanisms for the distribution to loved ones (at the correct time and in the correct manner). This might include setting up trusts, establishing family investment companies and considering how to protect wealth from life events such as divorce or separation.

Investment in education and skill development

An integral part of intergenerational planning is investing in education and skill development for younger family members. This might involve funding higher education, vocational training or mentoring opportunities that equip them with the tools to thrive in an evolving world.

Distribution of physical and sentimental possessions

Estate planning often includes the drafting of legal documents such as, Wills, trusts, pre-nuptial and post-nuptial agreements, to name a few. These legal documents ensure a smooth transfer of assets and wealth, while also minimising potential conflicts and managing the associated tax liabilities.

Preparation for health-related challenges and long-term care

Lasting Powers of Attorney (LPAs) and Advanced Directives can alleviate potential burdens on future generations and ensure dignity and well-being in later years in accordance with your wishes.

Environmental stewardship and social responsibility

Families can establish initiatives that contribute positively to the environment and society, leaving a legacy of sustainability and philanthropy, often through the set-up of charitable trusts.

How do you start an intergenerational estate plan?

The first step is to engage in conversation. Whether it is with us, your financial advisor or your accountant, it is important to identify the objectives you have set for yourselves and your family, however big or small, to ensure that you can plan accordingly.

Depending on your circumstances it may be appropriate to involve your loved ones in these discussions. We often find ourselves chairing meetings between family members to help families understand the ‘big picture’, the interactions across generations and what this looks like from their respective financial perspectives.

Once the plan has been formalised, because circumstances are always changing, you must regularly review and update your plans to accommodate new family members, changing financial situations and evolving goals. Treat your planning as an ongoing journey rather than a destination