In recent studies conducted by financial institutions like OneFamily and Barclays Wealth, a change in how families handle inheritance has come to light. Traditionally, family wealth was passed down from older generations to their heirs, typically between the ages of 55 to 64. However, the landscape is somewhat changing.
OneFamily’s research reveals a remarkable trend: an estimated £8.5 billion of inheritance wealth now skips a generation annually. Older relatives, recognising the financial challenges faced by their younger family members, are choosing to support them earlier in life. This shift is not just a result of generosity – as 70% of individuals aged over 55 believe that the current economic climate is making it tougher for younger generations financially compared to their own youth.
As a response to this economic reality, nearly a third (31%) of these older individuals express a desire for their wealth, and that of their parents, to be shared more broadly across the family. Almost half (47%) feel a sense of responsibility for financially supporting their families, while 36% are conserving their wealth to pass it down.
Interestingly, this change in inheritance patterns has led to a rise in ‘living’ inheritances, where family wealth is gifted to loved ones in the present. About 18% of those over 55 have already given such living inheritances, with an additional 15% planning to do so. The average living inheritance stands at a substantial £27,000.
Equity release has become a popular method for older individuals to provide financial aid to their families, with 24% of homeowners over 55 expressing their willingness to use home equity to assist their loved ones. Moreover, the rising cost of living has intensified the need for immediate support. According to Barclays Wealth, over a third (37%) of parents of 40-year-old millennials anticipate giving inheritance support this year to help their children cope with day-to-day living expenses. As inflation rates climb, parents are becoming more flexible, offering financial assistance when it is needed the most, rather than adhering to traditional inheritance timelines.
This shift in generational wealth dynamics highlights the evolving nature of family financial planning. Families are now more open to adapting their strategies, ensuring that the younger generation receives crucial support at the right time, reflecting the changing economic challenges of our times.
Families will require added flexibility around their inheritance planning from their advisors and It’s likely they will also require frequent updates to their legal documentation.
For the estate planning professional, regular changes to legal documents are a time-consuming process. Utilising Will and Trust drafting software can help speed up this process as well as offering tighter version control.
If you would like to spend less time on admin and more time with your clients, then look at Arken Legal’s estate planning software.