Intergenerational Wealth Planning

Building a financial plan
that works for all generations

Enabling families to
plan withbuild withsupportcare for

each other across the generations.

Looking after your family

When it comes to providing for successive generations, the protection of accumulated intergenerational wealth becomes important.

Traditionally, wealth has passed from one generation to the next upon death, however, intergenerational wealth management challenges that notion and looks at how families can use their wealth more collaboratively to support each other throughout their lifetimes. This offers legitimate estate planning and tax mitigation opportunities, whilst providing the much-needed assistance to alleviate the financial burdens of everyday life.

How we work

Increasing life expectancies and major social changes mean many families need to reconsider how their wealth can work harder for the benefit of the whole family.

Our advisers will help you future proof your finances, with an eye towards your tomorrow, to help you find the answers for events both expected and unexpected.

From protection to stretching retirement income across generations, helping loved ones onto the property ladder or investment planning for your children to understanding the importance of estate planning, we can help and advise you and your family every step of the way, by creating an intergenerational wealth management plan.

Investing in their future

Looking at the options you have to help save for your children

The Maths of Inheritance Tax

Working out how inheritance will affect you

IHT and Intergenerational Planning

Passing your assets on in the most efficient way possible

Gifting and IHT

How gifting can work for you

How can I invest for my children?

 

It costs a couple £160,692 to raise a child to 18 (LV, 2022). With stagnant wage growth and low interest rates, many parents feel squeezed to make ends meet, let alone think about funding future costs like university or a housing deposit. But saving for your kids need not break the bank and could make a huge difference to their future.

 

The tax-friendly Junior Individual Savings Account (JISA) is a very attractive option.

Any returns are free from Income Tax and Capital Gains Tax. Savers can typically make regular or one-off payments up to the current annual limit of £9,000. Money held in a JISA is locked in until the child reaches 18, after which it can be converted into an adult ISA and continue to enjoy the same tax advantages.

 

Less well-known is that children can also have a pension fund as soon as they are born – and setting one up can bring significant tax advantages. Even if your child is a non-taxpayer, they will still get basic-rate tax relief on contributions. That means a maximum of £2,880 a year is automatically grossed up to take account of tax at 25%, giving an annual investment of £3,600.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

 

Services Discussed 

Calculating your liability is often, although

not always, simple

 

An estate will be subject to Inheritance Tax (IHT) if, on death, it exceeds the individual nil-rate band which currently stands at £325,000.  In 2015 the Chancellor introduced an additional tax allowance; the ‘residence nil-rate band’ (RNRB).  It currently potentially provides a total nil-rate band of up to £1 million for married couples or people in civil partnerships who leave their main residence to their children and was one of the biggest changes to Inheritance Tax in recent times.

How it Works

Count up the value of all the assets remaining on death, subtract the nil-rate band remaining and what is left is taxed at 40%. If your spouse dies before you without fully using their nil-rate band, the proportion of the unused amount can be carried forward to use on your death. 

The measure is effective for transfers of property on or after 6 April 2017.  The transfer can only be made on death, but could be by Will, under the rules of survivorship. The introduction of the Residence Nil-Rate Band has been phased in as follows:

£100,000 for the tax year 2017/18
£125,000 for the tax year 2018/19
£150,000 for the tax year 2019/20
£175,000 for the tax year 2020/21

 

The 2020/21 limit has been frozen at this level until 2026/27 by the Consumer Price Index, having scrapped the previously planned timeframe. The allowance is available to those estates that are ‘closely inherited’ and contain a ‘qualifying residential interest’ – this latter point means that the individual must have owned the property and have lived in it at some point. Therefore, with effect from 2017/18 tax year, if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £425,000 or £850,000 for married couples and registered civil partners.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

Gifting is a straightforward way to mitigate your IHT

 

Inheritance Tax (IHT) is one of the government’s most reliable forms of income. IHT receipts received by HMRC during the tax year 2020-2021 came to £5.4 billion and have remained around that level for the past four years, according to official statistics. Yet so much of the tax paid on the value of your estate after you die is avoidable.

 

Intergenerational wealth gifting helps you support your family at the same time as reducing your IHT liability. You can give away up to £3,000 each tax year (your ‘annual exemption’), as well as make any number of small gifts up to £250 per person, and not incur IHT. Almost all gifts become IHT exempt if you survive for seven years.

 

These are the main factors to consider:

  • Gifts to your spouse or civil partner are exempt from tax during your lifetime, or upon death.

 

  • A tax-free allowance of up to £3,000 applies to gifts made to other beneficiaries. You can carry the allowance over for one tax year, meaning you could give away up to £6,000 in a tax year.

 

  • Intergenerational wealth gifts to children or grandchildren which pay for a wedding or civil partnership can be exempt from IHT and are considered separate to the £3,000 annual exemption. You can give up to £5,000 to a child or £2,500 to a grandchild.

  • Gifts made from your regular income are tax free, as long as you can prove they do not diminish your own standard of living.

 

  • Gifts above the allowance are normally exempt from IHT if you survive for seven years after making the gift. Gifts above the nil rate band, made between three and seven years before your death are taxed on a sliding scale – known as ‘taper relief’.  The longer the time, the less you pay.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

In an age where the online world is at our fingertips, why shouldn’t your wealth management be there as well? Our Online Services allow you to access all your wealth investments in one smart place. Whether you’re already registered, or just about to, here are some great features that can help you get the most from your online account.

Online registration:

Registering for Online Services with an activation code allows instant access. If you haven’t got a code, please contact your adviser. Registering online ensures all information is password protected.

Set your preferences:

Set your communication preferences to receive your digital reports and electronic correspondence.

Self-service:

Make online debit card payment for ISA and any JISA top ups with a debit card

linked to your account, on demand and at a time that suits you. Make payments to Unit Trusts, Retirement Accounts and new ISAs. (Speak to your adviser in order to get this process started) View the value of your investments in a range of currencies and see a breakdown of

this valuation. Instant notifications when a new document is available to view.

For every client opting for paperless correspondence, St. James’s Place will donate £5,to the St. James’s Place Charitable Foundation.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

Investing in their future:

Less well-known is that children can also have a pension fund as soon as they are born – and setting one up can bring significant tax advantages. Even if your child is a non-taxpayer, they will still get basic-rate tax relief on contributions. That means a maximum of £2,880 a year is automatically grossed up to take account of tax at 25%, giving an annual investment of £3,600

What we offer

Estate Planning

Estate planning can help you navigate and provide protection for the future. Whether you are dealing with power of attorney or managing a person’s legal, financial or personal tax affairs before or after they have died, it is extremely important to ensure you have the right support via an intergenrational wealth plan.

Trusts

If you can afford it, setting up a trust that no one can touch or benefit from while you are living is a useful way to reduce IHT liability and spread intergenerational wealth. You could arrange a trust for a child, or grandchild, so they will have money coming to them upon reaching a certain age. Alternatively, you could use the trust to support a family member who has a disability.

Inheritance Tax Planning

Once considered a tax on the truly affluent, Inheritance Tax (IHT) now affects more families than ever before. Careful Inheritance Tax (IHT) planning is all about intergenerational wealth management, through passing as much of the proceeds of an estate as possible to chosen beneficiaries, rather than to HMRC. It is also about maintaining flexibility and control over any arrangements that are made.

Gifts & Gifting

Should a liability to inheritance tax be triggered by your death, a large proportion of your wealth, including your assets such as the family home, investments and even heirlooms might have to be sold. However, by gifting, steps can be taken to reduce the value of your estate, encourage intergenerational wealth and leave assets for future generations.  Whilst there are no limits on gifting, (subject to exceptions), you must normally survive each gift by seven years to avoid any potential tax implications.

Later Life Planning & Long Term Care

Thanks to better medical care and healthier lifestyles, we all have the prospect of living longer. This increase in life expectancy brings a number of financial implications, coupled with the possible implications associated with needing care in the future. Protect your family and estate against risk.

Passing money through generations

Today’s retirement is a different prospect from the experiences of generations past, with greater flexibility and personal choice for the next stages of your life. Depending upon the choices you make, you can keep options open throughout your retirement journey and effectively manage retirement savings to meet goals as they change over time. 

Investing in a better future for your children

Setting up an investment plan for a young family member has many advantages. Putting aside funds on a regular basis means that even modest amounts will benefit from the effects of compounding and help reduce the risk of investing significant amounts at the wrong time or during periods of market volatility.

Helping loved ones onto the property ladder

The difficulties facing younger people joining the ranks of homeownership are well-reported, with renting often now stretching well into one’s thirties and beyond. Consequently, an increasing number of parents and grandparents are stepping in to help children onto the housing ladder. 

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

Trusts are not regulated by the Financial Conduct Authority

For more details about services that we offer reach out to us on 01202 695801, or click the button below.

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