We are living in an unprecedented age of personal wealth. Today’s baby boomer generation are far richer than any before, built on the back of generous pensions, secure high paid jobs and soaring property values. On the flip side, life is much more challenging for the next generation, whose future financial security and goals are increasingly reliant on receiving a sizeable inheritance.

On paper, trillions in assets are forecast to be inherited over the next two decades. Yet exactly how much of that wealth will actually transfer remains to be seen. With people living longer and enjoying more active lives in retirement, the age at which the next generation will eventually benefit and how tax efficiently the wealth is transferred will be the two big issues.

Whether your motivation is to support your relatives, protect vulnerable family members, or to leave a lasting charitable legacy, passing on your wealth is a highly emotive and complicated topic. A subject that is as much about what you want to do with your money as it is about the desire to ensure the tax man isn’t your largest beneficiary.

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Ensuring Inheritance Tax isn’t your biggest beneficiary

What is Inheritance Tax (IHT)? Will you have an IHT liability? Can you reduce it? Should you insure against it? What can you give away in your lifetime? As Baby Boomer wealth, fuelled by ever-rising house prices continues to increase, more and more people are likely to be impacted by Inheritance Tax. Not since the days of Bertie Wooster in the 1930’s has inheritance played as big a role in the economy. However, paying Inheritance Tax doesn’t have to be inevitable. In many cases this most emotive and unpopular of taxes can be minimised through the use of allowances or exemptions, or potentially be avoided altogether with careful planning.

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How and to whom should I transfer my wealth?

Should your wealth skip a generation? When is the best time to give money away? If you have children should they be treated equally? Who do you leave your money to if you have no immediate family? Will your partner automatically inherit your wealth if you have no legal partnership? Deciding who should inherit and how best to transfer your wealth is rarely simple. Family dynamics are often highly complicated. You and your spouse or civil partner might have disparate views on how, or even if, any of your respective relatives should inherit your wealth. A child might have an urgent need to inherit early. Your children from an earlier marriage might now be in their late 50’s or 60’s and no longer shouldering the burden of a large mortgage or school fees, whilst your children from a second marriage are feeling financially stressed. Whatever your goals, getting financial advice will help you pass on your money in a way, and at a time, that creates maximum benefit for the people that matter to you most.

Property is expected to account for over 70% of the wealth transferred over the coming years.

* The Centre for Economic and Business Research & Kings Court Trust, 2017

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Estate Planning

Getting all your affairs in order, from deciding who should inherit your wealth to making provisions for vulnerable family members, can be an extensive but invaluable process. Known as Estate Planning, it ensures you eliminate uncertainty over the administration of your assets and aims to maximise the value of your estate by reducing or eliminating taxes and other expenses. From setting up trusts to mitigating Inheritance Tax, Estate Planning should also take into account your needs in later life, including the potential cost of long-term care.

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