Over the next three decades, the asset-rich ‘Baby Boomer’ generation is expected to pass down a record-breaking amount of wealth to their often debt-saddled and rent-paying Millennial and Generation Z offspring. Money matters are never the easiest topic, but if this intergenerational wealth transfer is to be handled successfully, families need to start discussing it.
PASSING ON THE POUNDS
Baby Boomers, the wealthiest generation in history, are ageing. This will mean substantial growth in the yearly number of inheritances and financial gifts to offspring. Economists and financial observers have dubbed this intergenerational movement of money ‘The Great Wealth Transfer’. Estimates1 suggest that, over the next 30 years, an unprecedented £5.5tn could pass between generations in the UK and the average value of inheritances is set to grow from £62,000 in 2017 to £91,000 in 2027.
TACKLING THE TABOO
The importance of the wealth transfer process is unquestionable, but most families remain uncomfortable when talking about money – with finance among the few remaining taboo topics. However, it is vitally important that retirees involve their offspring in financial planning decisions if the wealth transfer process is ultimately to be successful.
Planning for inheritance, unsurprisingly, raises a number of concerns for parents. How do they help their children financially without damaging their work ethic or their relationship with their partner? In addition, parents need to balance the emotional desire to leave significant sums to heirs with the need to ensure their own financial wellbeing, particularly in an era of spiralling long-term care costs.
TALK ABOUT FINANCE
Arguably, the key inheritance challenge is one of ensuring that children are ready to take on financial responsibility for family assets. Encouraging their involvement in your financial planning decisions now is a particularly good way to boost their financial literacy and ensure they are ready when the time comes. Independent Financial Advisers have experience in instigating and assisting these conversations.
1Kings Court Trust, 2017