multi generational family sitting at table feature

The Value of Intergenerational Financial Planning

The value of intergenerational financial planning lies in what you can do for your loved ones both before and after death. Proper preparation can do wonders to ensure your nearest and dearest are provided for, and that any additional stresses are minimised in what is likely to be an already difficult, highly emotional time. 

Find out more about what multi generational financial planning is, how to plan for two generations or more, what the benefits of intergenerational financial planning are, and more in this blog.

What is Multi Generational Financial Planning? 

Multigenerational financial planning is the process of managing your wealth and ensuring that when the time comes, your money is able to transfer to the next generation. This is done to both ensure your legacy is maintained, and that your children receive financial support throughout a tough time. 

People live and work their entire lives to accrue an estate and portfolio of assets to be proud of. But without consideration of how you may pass your money on to your children or other young relatives you may have, was everything for nothing?

Sound multigenerational financial planning could involve a variety of things, including the transfer of assets to your children, succession plans of your business, and leaving financial gifts to young relatives.  

How to Financially Plan For Two Generations

Planning your own finances is an important step in everybody’s life. However, working out how to prepare your assets for two generations is something that many do not consider until it is too late. Intergenerational financial planning involves considering the future of any children, nieces/nephews, their children, and in some circumstances, even parents may be considered. 

grandfather and grandchild

There are a variety of steps you are able to take in order to help you financially plan for two generations, this includes: 

Investing for Inheritance 

When setting up an estate plan, you are able to pass down more than just assets and money to future generations. You are also able to set out your investments with the aim of your children inheriting them one day. 

This means that you are able to plan for the future and develop a clear investment strategy with the financial future of your children, grandchildren, great grandchildren, etc. in mind. 

Create a Trust to Protect Your Assets 

One of the most effective methods of intergenerational financial planning will involve the creation of a trust. This financial framework allows you to make clear your exact wants and demands for not only what happens to your assets, but what happens when you die in general. Benefits of using a trust for estate planning include: 

  • The ability to provide for under 18 relatives
  • Have a say in when and in which scenarios money can be released
  • Protect your estate from possible divorce or bankruptcy in future generations 
  • Be more specific in what happens to high value assets
  • Protect assets from nursing homes 

A well thought out estate plan, including a trust, will act as the framework on which your intergenerational financial planning will be based. A trust is a highly powerful method of protecting your assets and ensuring they end up exactly where you want them to. In addition to the benefits above, trusts can enable your legacy to go even further by minimising the impact of inheritance tax. 

Setting up a trust can be highly complicated — with so many moving parts and intricate details that you need to make sure you get right, for fear of causing any potential dispute in the future — it is vital that you deal with somebody you can trust. 

Contacting a legal professional to ensure that your trust is set up correctly is key. When it comes to the financial future of your children, your children’s children, and beyond, you likely don’t want to take the risk. 

Plan for the Future

It goes without saying that as a parent, you are expected to provide for the expenses of your children. This can include paying for their board, their food, education, additional activities etc. With the financial climate seemingly getting worse and worse, and the impact of this being felt by nobody more than the younger generations — it may be worth considering if you can continue to assist them going forward, no matter what happens.  

With proper planning, you can devise strategies to support your children in a variety of ways for as long as they may need it. Examples of ways you can support your children after your death include: 

  • Trusts set up with the condition to pay out specifically for milestones such as weddings, university education, to assist with purchasing a first home, etc. 
  • Provide financial support to help future generations to find a foothold in an exceedingly pricey world. 
  • Gifts given seven years prior to death will be exempt from inheritance tax obligations. This means that should you wish to purchase a car for your child, assist with an extension on their house, or pay for them to travel, you can.

graduation cap and diploma to signify family member going to university

Older Generation Assistance 

When we think about intergenerational financial planning, understandably we often think about protecting future generations. However, another element of the process can include providing for older loved ones as well. 

For example, if a parent needed to enter a specialist living facility and you were paying in to ensure that they got the best care possible, what would happen if you died suddenly? It’s incredibly likely in this situation that your parent would no longer be able to continue with their care, meaning that they have lost their home alongside losing a child. 

The average weekly cost of a care home facility in the UK is around £700 — a figure that will likely only continue to rise. The last thing that you, and likely your parent, would want is for your children or grandchildren to be financially hamstrung by paying for an older relative’s care home fees. 

This is why, when creating an intergenerational financial plan, it may be worth taking into account potential care home or nursing fees — potentially sparing a huge stress away from your children even after you are gone. 

The Benefits of Intergenerational Financial Planning 

The benefits of intergenerational financial planning are as clear as day. It can be used to allow for the different generations to support one another both during and after death. It acts to ensure that wealth and assets remain with a close-knit family unit, allowing them to be passed on from generation to generation. 

The value of intergenerational financial planning lies in the following potential benefits: 

Keep Wealth Close

Older generations are living longer and longer. This means that not only are peoples estates being built for longer, but there are more generations alive at one time than ever before. 

According to studies, approximately 90% of all family wealth is exhausted within three generations. A commonly held belief as to the cause for this boils down to a failure to properly undertake intergenerational financial planning. Assessing your estate, seeing what you have, what you can give, and where it is needed can do wonders to ensure family wealth, assets, property, and heirlooms are passed down and maintained across multiple generations. 

Passing on Wealth in a Tax-Efficient Way

Understanding how to pass down your estate in a way that best minimises the impact of inheritance tax is vital in any efficient intergenerational financial planning. 

The most effective measures to decrease the impact of inheritance taxes are: 

  • Planned gift giving 
  • Placing assets in a trust 
  • Writing a watertight will

For more information about inheritance tax planning, see our in-depth guide. 

Protect Loved Ones

One of the benefits of intergenerational planning that should not be forgotten is the impact it can have in protecting the future of your nearest and dearest. Proper financial planning allows you to make sure that your children, nephews and nieces, grandchildren etc. are financially supported in the event that you pass. 

You are able to help to provide for them, make sure that they can afford to buy a home, take the trip of their dreams, get married, and much more — effective estate planning can ensure that your legacy lives on past you.

row of piggy banks to signify protecting money for many generations

Specialist Financial Planning Advice from Just Wills and Legal Services

Discussing the value of intergenerational financial planning is worthless if you don’t make the commitment before it’s too late. Nobody wants to think about their own death, about what will happen to their assets, or what will happen to their loved ones. However, when it comes to planning for the future, there’s no time like the present. 

Planning ahead and being organised for any eventuality can save you, and your family from all manner of potential stress down the road. 

The most important thing to remember if you find yourself daunted by the intricacies of the process of intergenerational financial planning is that not only do you not need to tackle it on your own, it is not recommended. 

At Just Wills and Legal Services we have a team of experts on hand who have assisted countless individuals, to ensure that their intergenerational financial planning is ready for when the time comes. 

For more information on the value of intergenerational financial planning, what steps you can make, and more, get in touch with a member of the team today.

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