Family financial literacy and preparing the next generation for wealth

Not all families talk about wealth, its purpose and their hopes from one generation to the next, but it’s important to have a conversation and it’s never too late to start.

Every family has a different and unique dynamic, and set of financial circumstances, but having a shared goal means that wealth becomes an opportunity and not a burden for future generations.

Advisors can help to facilitate these conversations, looking at opportunities for tax and wealth planning in the short, medium and long term, whilst being mindful of any future tax changes which are due to begin such as changes to the taxation of pensions from April 2027.

Whilst it’s important to focus on some of the more immediate needs, it is also essential to have a long-term strategy which helps achieve wealth goals across the generations.

No one is born understanding finances and how to best manage and look after them. Education is therefore key.

Shared purpose

Many families don’t discuss how much wealth they have accumulated, and it can come as a surprise to younger generations.

Having a shared purpose will help the family agree on issues such as the fair division of wealth, how the needs of different family members is assessed, whether education and/or property is funded or passed down, expectations for careers within or outside a family business or farm and attitudes to philanthropy.

Sometimes siblings fall out because they expect parents to share wealth equally, whereas parents might want to help out what they see as a less fortunate child as opposed to a more successful one who has financially flourished independently of them. And, what happens if a grandparent wants to fund a private education or university place for their grandchildren, but not all of their own children have a family. Or if one child runs the family farm or business, but another shows no interest yet still expects to receive an equal share.

There is also a conversation taking place globally within many families about the timing of when wealth is passed from one generation to the next. Over the next few years there will be the largest transfer of wealth from one generation to another taking place. If your children or parents live outside of the UK, then what is the best way to structure this transfer?

What is fair

Agreeing on what is fair is a fundamental starting point as it helps to remove ambiguity and the likelihood of a fall out. The key is to remove both expectation and ambiguity. By working together, families can navigate friction points and address the question of fairness in a balanced and measured way.

Succession

Introducing your children and grandchildren to understanding wealth means equipping them with the skills and knowledge alongside the responsibility it brings. Many parents and grandparents are looking to make decisions earlier due to changes to Business Property Relief and Agricultural Property Relief (from April 2026) and ahead of changes next year (April 2027) which changes the way pensions are taxed, forming part of an individual’s estate for IHT rather than sitting outside of it.

Having a team of advisors to sit down with your family can help to facilitate all of these conversations, answer questions and provide a clear structure for the path forward.

Where to start

Before making any big decisions, a good starting point is to look at whether all of the tax-free allowances have been used effectively, especially for younger members of the family, such as pensions, lifetime ISAs and junior ISAs, as these can often provide useful tax-free returns over time.

We can advise on the next steps, reviewing information, helping to facilitate a discussion and ensure the family can move forward together, in agreement and with a clear purpose. Contact us today.