Why financial planning as a family can benefit all generations

Do you talk about money with your family? If you don’t, you’re not alone.

Research from Klarna earlier this year revealed that a third of UK adults feel too uncomfortable to talk about money with their peers. The study also revealed that one-fifth have never discussed personal finances with friends or family, with 1 in 3 feeling too awkward to raise the subject.

One increasingly popular way to break this taboo is to include your family in your financial planning process.

Read on to find out why working together as a family – and sharing a financial planner – can be so beneficial.

£5.5 trillion set to pass through generations in the next 25 years

In the coming decades, a staggering amount of wealth is set to pass between generations.

According to a report by M&G Wealth, wealth passed to younger generations is projected to double over the next 20 years – and could reach as much as £5.5 trillion by 2047.

Whilst you would undoubtedly want to see all the fruits of your life’s work pass down to your children and grandchildren, without careful planning much of this wealth could end up in the hands of HMRC in the form of Inheritance Tax (IHT).

Indeed, official government figures show that estates paid a record £6.1 billion in IHT in the 2021/22 tax year – up £729 million (14%) on the previous year.

If you’re used to keeping your finances separate and have not yet considered working with other generations of your family to formulate an intergenerational financial plan, your loved ones could face significant IHT issues on your death.

One way to mitigate this issue is to work on your financial plan alongside your family.

1 in 3 advised families now share the same financial planner

Increasing numbers of people, including many HFMC clients, are now planning as a family.

Indeed, the M&G Wealth report found that 1 in 3 advised families now share the same financial planner, with around 3 in 5 of those sharing the same adviser as their parents.

Of course, sharing a financial planner doesn’t have to mean sharing every detail of your financial plan. It can simply mean working in tandem with other generations to create a plan that more accurately reflects your priorities and the situation of others.

It’s also a step that can provide peace of mind. You have the reassurance that the people close to you are receiving expert financial advice that can help them reach their goals and achieve long-term financial security.

Interestingly, research shows that all generations are comfortable with sharing an adviser with a family member:

  • 37% said they “would feel relaxed as their family already trusted them”
  • 34% “liked that all the family’s finances would be in one place, so everyone could review them together”
  • 28% went further still, saying they would feel “relieved they’re sharing the same adviser”.

Intergenerational wealth planning can be complex, and the different generations are likely to have many different concerns. However, using the same financial planner can help you understand what your family is worried about and the steps that they can take to improve their financial security.

Using the same financial planner can benefit your family in numerous ways

The M&G Wealth research reveals that there are many valuable benefits of planning as a family.

Source: M&G Wealth

Let’s consider these one at a time.

Saving money on tax

Anyone with an estate worth more than £325,000 – or £500,000 if you intend to leave your home to a child or grandchild – is likely to face an IHT liability on death.

No one wants to lose 40% of their estate to tax, so estate planning should be a core part of your financial plan. Working with your parents or children can ease the transfer of wealth and help you to make the most of gifting and trusts.

Everyone in the family is treated fairly

Openness and honesty can ensure that all your beneficiaries know where they stand. Working together as a family can demonstrate you’re being fair to all parties, reducing possible squabbles and disagreements.

Helping younger family members

Leaving a legacy on death can boost the financial security of the younger generation. However, increasing life expectancies can mean your children could be in their 60s or 70s by the time they inherit.

It may be more useful to consider gifting to your child or grandchild at a time in their life where the gift would have more impact – for example, to help them buy a home.

We can use sophisticated cashflow modelling to establish what level of gift you can provide to a family member without damaging your own standard of living or future plans.

Undertaking this process multi-generationally can therefore benefit both you (you can reduce an IHT liability through gifting) and your child/grandchild (they receive the gift at a time that is useful to them).

Ensuring the family is aware of each other’s financial situation

Without a conversation about intergenerational wealth transfer, your beneficiaries may make assumptions about the likely level of inheritance.

If these prove to be wrong, it can generate discontent and resentment. So, creating a financial plan as a family ensures everyone knows where they stand, and that you manage expectations when it comes to the transfer of wealth.

Supporting a parent/grandparent

Financial planning as a family doesn’t just involve working with younger generations.

If your parents or grandparents have never sought advice from a financial planner, they could have significant tax issues they have never considered. Encouraging them to work with your planner could ensure more of their wealth is passed to their loved ones, rather than lost in IHT.

Get in touch

Creating a family financial plan offers many benefits, from managing expectations to ensuring the seamless transfer of wealth.

To find out how we can help you and your family, please email or contact us on 020 7400 4700.

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