The differences between older and younger Brits is causing severe trust issues around succession planning and inheritance, research by financial advice firm Progeny has found.
The ‘Planning pass it on’ report, carried out by YouGov on behalf of the advice company, revealed that 25% of baby boomers do not trust young Brits to use their inheritance wisely.
On top of that, nearly half (48%) said that the younger generation’s attitudes and priorities will affect their decision making when passing down wealth.
Among the respondents, 60% plan to pass on some share of family wealth to the next generations, yet around half (49%) didn’t know how to do it.
A quarter only had a “rough idea” of who the beneficiaries of their inheritance are going to be and what share they may receive. Just 17% had a formal succession plan in place and a mere 3% had talked to a financial adviser about it.
Around half, were either unsure or disagreed that their plans to pass on wealth were informed by what was the best financial way forward for their entire family.
Neil Moles, chief executive of Progeny, said: “This research has given us an illuminating snapshot of national attitudes towards inheritance and intergenerational wealth transfer today. Transferring money to the next generation is an ambition for many, yet there is a stark lack of any structured planning in evidence. This creates risk and missed opportunities for those on both sides of the wealth transfer.”
Daunting process
When asked about what barriers they were facing when passing on money to loved ones, nearly a fifth (18%) admitted to not knowing enough about inheritance planning and inheritance tax and deemed it as a “significant obstacle”.
Several others were also daunted by the fact that they didn’t even know where to start the succession planning process, while others didn’t know how they would distribute their wealth while keeping some for their later life.
Yet around 47% of baby boomer Brits claimed they were confident about either making plans or financial decisions around wealth transfers, with just 32% saying the opposite.
In comparison, 45% of generation X and millennials were confident about their ability to make use of any inheritance, compared with 39% who did not feel the same way.
But 20% of baby boomers said they did not want to pass on a “significant sum of money” to their loved ones, and nearly half (49%) wanted to use their money to enjoy life rather than leave an inheritance.
Despite the differing attitudes, succession and inheritance are still very much taboo topics, Progeny has found, with 41% among the younger generations finding discussing wealth transfers uncomfortable.
Only 58% of baby boomers had discussed the topic with loved ones; of the 42% who hadn’t, around 37% never intend to have such conversations with their family.
Must do better
Moles added: “In the years ahead, we will see more families having more complex requirements when it comes to passing on their wealth to the next generation. In these circumstances, financial advice and lifetime financial planning will be more important than ever.
“However, it’s clear that we in the financial advice industry need to do a better job of demonstrating our strengths and showing how we can help families with their estate planning. Our role is to create the space for constructive, multigenerational conversation within families, allowing them to make important decisions about transferring wealth in a supportive and informed environment.
“A unique set of economic circumstances have helped the Baby Boomer generation to build up significant levels of wealth, in some cases relatively effortlessly, compared with the generations that went before them. In order to keep this wealth in the family, they need good financial and estate planning around passing it on effectively to the next generations.
“We have an opportunity to reconsider inheritance and intergenerational wealth transfer planning as a responsibility for both generations to share – those who are giving and those who are receiving – bringing clarity and peace of mind to both.”
